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EXHIBIT 10.15
March 22, 2001
Mr. Eric C. Nielsen
c/o The Keith Companies, Inc.
2955 Red Hill Avenue
Costa Mesa, CA 92626
Dear Mr. Nielsen:
The Keith Companies, Inc., for itself, its successors and assigns
(collectively, the "Company") considers it essential to the best interests of
its shareholders to foster the continued employment of key management personnel,
particularly if there should develop uncertainty regarding the business climate
surrounding Company's future. In this regard, the Board of Directors of the
Company (the "Board") recognizes that the possibility of a Change in Control (as
defined below) of the Company's ownership may exist now or in the future and
that such possibility, and the uncertainty and questions which it necessarily
raises among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its shareholders in a
period when their undivided attention and commitment to the best interests of
the Company and its shareholders would be particularly important.
Accordingly, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including yourself, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control of the Company. This
Agreement is not intended to alter materially the compensation and benefits that
you could reasonably expect in the absence of a Change in Control of the Company
or your "at will" employment status and, accordingly, this Agreement, though
taking effect upon execution hereof, will be operative only upon a Change in
Control of the Company.
1. In order to induce you to remain in the employ of the Company, the
Company agrees that you shall receive the benefits set forth in this letter
agreement (the "Agreement") in the event you are involuntarily or constructively
terminated from your position with the Company at any time during a two year
period (a "Termination") following the date of a Change in Control of the
Company (as defined in Section 3 hereof) under the circumstances described
below. For the purposes of this Agreement, involuntary or constructive
Termination shall include, without limitation:
(a) A reduction by the Company in your base salary, bonus
computation or title, or a substantial reduction in your
responsibilities as in effect immediately prior to the Change in Control
or as the same may be increased from time to time or a change in
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March 22, 2001
Page 1
employment conditions materially adverse from those in effect
immediately prior to the Change in Control;
(b) A failure by the Company to continue any bonus plans in
effect as of the date of a Change in Control (the "Bonus Plans") or a
failure by the Company to continue you as a participant in the Bonus
Plans on at least the same basis as you presently participate in
accordance with the Bonus Plans as of the date immediately prior to the
Change in Control;
(c) Without your express written consent, the Company's requiring
you to be based anywhere other than within 25 miles of your present
office location, except for required travel on the Company's business to
an extent substantially consistent with your present business travel
obligations;
(d) The failure by the Company to continue in effect any stock
ownership plan, stock purchase plan, stock option plan, life insurance
plan, health-and-accident plan or disability plan in which you are
participating at the time of a Change in Control of the Company (or
plans providing you with substantially similar benefits), or the taking
of any action by the Company which would adversely affect your
participation in or materially reduce your benefits under any of such
plans;
(e) The taking of any action by the Company which would deprive
you of any material fringe benefit (including, by way of example and
without limitation, auto allowance) enjoyed by you at the time of the
Change in Control or the failure by the Company to provide you with the
number of paid vacation days to which you are then entitled in
accordance with the Company's normal vacation policy in effect on the
date of the Change in Control;
(f) The failure by the Company to obtain the assumption or the
agreement to perform this Agreement by any successor of the Company; and
(g) Any other involuntary Termination which is not otherwise a
result of (i) an act or acts of dishonesty by you constituting a felony
for which you are convicted concerning your personal enrichment at the
Company's expense, or (ii) a deliberate and intentional refusal by you
(except by reason of incapacity due to illness or accident) to comply
with the provisions of any confidentiality agreement between you and the
Company, and such breach results in demonstrably material injury to the
Company.
2. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through March 22, 2003. At the end of each full two
year term of this Agreement, this Agreement shall be automatically renewed for
an additional two year period, unless the Company, at its sole and absolute
discretion, notifies you of nonrenewal, such notice to be delivered in writing
at least ninety (90) days prior to the end of the two year period. Upon
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March 22, 2001
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notice of nonrenewal, you will be entitled to the protection afforded under this
Agreement for the remaining term of this Agreement.
3. Change in Control. All benefits set forth hereunder shall be payable
to you in the event (i) a Change in Control of the Company (as defined below)
shall take place during the term of this Agreement, and (ii) a Termination shall
occur at any time within the two year period immediately following the Change in
Control. For purposes of this Agreement a Change in Control of the Company shall
mean a change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Company is then subject to such reporting requirement; provided that,
without limitation, such a Change in Control shall be deemed to have occurred if
(i) any "person" (as such term is used in Section 13(d) and 14(d) of the
Exchange Act), other than (A) Aram Keith (or his family members or affiliates)
or (B) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the combined voting power
of the Company's then outstanding voting securities; (ii) there is a merger or
consolidation of the Company in which the Company does not survive as an
independent public company; (iii) the business or businesses of the Company for
which your services are principally performed are disposed of by the Company
pursuant to a partial or complete liquidation of the Company, a sale of assets
(including stock of a subsidiary) of the Company, or otherwise; or (iv) during
any period of two (2) consecutive years during the term of this Agreement,
individuals who, at the beginning of such period constitute the Board, cease for
any reason to constitute at least a majority thereof, unless the election of
each director who was not a director at the beginning of such period has been
approved in advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of the period.
4. Compensation Following Termination.
(a) Subject to the terms and conditions of this Agreement, after
a Change in Control of the Company which occurs during the term of this
Agreement, followed by your termination of employment at any time during
the two-year period immediately following the Change in Control, and if
such termination is a "Termination" as defined in Section 1 above, you
shall be entitled to (i) a lump sum payment, within fifteen (15) days
following your Termination, in an amount equal to two times the highest
annual level of total cash compensation (including any and all bonus
amounts) paid to you by the Company (as reported on Form W-2) during any
one of the three consecutive calendar years inclusive of the year of
your Termination and using, for the year of your Termination, the stated
level of annual cash compensation (including any and all bonus amounts)
in effect on the date of your Termination (i.e., the two calendar years
before the year of your Termination and your stated annual cash
compensation, including bonus amounts for the calendar year during which
your Termination occurs, treating, as earned,
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March 22, 2001
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the amount of any bonus for which you are eligible during the year of
your Termination), (ii) the immediate vesting of all previously granted
but unvested stock options to acquire securities from the Company and
outstanding on the date of the Termination, (iii) continuing health
coverage for a period of twenty-four (24) months, at a level
commensurate with that which you enjoyed with the Company immediately
prior to such Change in Control or, if such coverage is not available to
the Company, payment in an amount to enable you to obtain substantially
equivalent coverage for such period, (iv) for a period of twenty-four
(24) months, all other benefits under welfare benefit plans, practices,
policies and programs provided by the Company and its affiliated
companies (including, without limitation, any other medical,
prescription, dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices,
policies and programs provide you with benefits which are less
favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for you at any time during
the 120-day period immediately preceding the date of a Change of Control
or, if more favorable to you, those provided generally at any time after
the date of a Change of Control through the date of your Termination, to
other peer executives of the Company and its affiliated companies, (v)
for a period of twenty-four (24) months fringe benefits, including,
without limitation, tax and financial planning services, payment of club
dues, and automobile allowance and payment of related expenses, in
accordance with the most favorable plans, practices, programs and
policies of the Company and its affiliated companies in effect for you
at any time during the 120-day period immediately preceding the date of
a Change of Control, or, if more favorable to you, as in effect
generally at any time thereafter until the date of your Termination with
respect to other peer executive of the Company and its affiliated
companies, and (vi) for a period of twenty-four (24) months a reasonable
level of outplacement services the scope and provider of which shall be
selected by you in your sole discretion.
(b) The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or
other claim, right or action which the Company may have against you or
others. In no event shall you be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to you
under any of the provisions of this Agreement and such amounts shall not
be reduced whether or not you obtain other employment. The Company
agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which you may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, you or
others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by you about the amount of any
payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal
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March 22, 2001
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rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that
any payment or distribution by the Company to or for the benefit of you
(whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without regard to
any additional payments required under this Section 5) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code
or any interest or penalties are incurred by you with respect to such
excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then you shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by you of all
taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 5(a), if it
shall be determined that you are entitled to a Gross-Up Payment, but
that the Payments do not exceed 110% of the greatest amount (the
"Reduced Amount") that could be paid to you such that the receipt of
Payments would not give rise to any Excise Tax, then no Gross-Up Payment
shall be made to you and the Payments, in the aggregate, shall be
reduced to the Reduced Amount.
(b) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall
be made by a certified public accounting firm as may be designated by
you (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and you within 15 business days of the
receipt of notice from you that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, you shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as
the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 5, shall be paid by the Company to
you within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding
upon the Company and you. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should
have been made
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March 22, 2001
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("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant
to Section 5(c) and you thereafter are required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of you.
(c) You shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after you are
informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be
paid. You shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies you in
writing prior to the expiration of such period that it desires to
contest such claim, you shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim;
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
you harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5(c), the Company
shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority
in respect of such claim and may, at its sole option, either direct you
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and you agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs you to pay
such claim and sue
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March 22, 2001
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for a refund, the Company shall advance the amount of such payment to
you, on an interest-free basis and shall indemnify and hold you
harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable year
of you with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which
a Gross-Up Payment would be payable hereunder and you shall be entitled
to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by you of an amount advanced by the
Company pursuant to Section 5(c), you become entitled to receive any
refund with respect to such claim, you shall (subject to the Company's
complying with the requirements of Section 5(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt
by you of an amount advanced by the Company pursuant to Section 5(c), a
determination is made that you shall not be entitled to any refund with
respect to such claim and the Company does not notify you in writing of
its intent to contest such denial of refund prior to the expiration of
30 days after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
6. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree in writing to perform this Agreement. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement
and shall require the Company to pay to you compensation from the
Company in the same amount and on the same terms as you would be
entitled hereunder following a Change in Control of the Company
immediately coupled with a Termination, except that for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date on which you shall receive
such compensation from the Company. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisee and legatees.
If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless
otherwise provided
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March 22, 2001
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herein, shall be paid in accordance with the terms of this Agreement to
your devises, legatee or other designee or, if there is no such designee
to your estate.
7. Notice. For purposes 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 when delivered or mailed by United States
Registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of a change of address shall be effective only upon receipt.
8. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of California and the venue for any legal action shall
be the Superior Courts of Orange County, California.
9. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. Entire Agreement. This Agreement constitutes the entire agreement of
the Parties with respect to the subject matter hereof and supersedes any prior
or contemporaneous agreements or understandings relating to the subject matter
hereof.
12. Headings. The headings of the Articles and Paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
13. Severability. The provisions of this Agreement are severable. The
invalidity, in whole or in part, of any provision of this Agreement shall not
affect the validity or enforceability of any other of its provisions. If one or
more provisions hereof shall be so declared invalid or unenforceable, the
remaining provisions shall remain in full force and effect and shall be
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March 22, 2001
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construed in the broadest possible manner to effectuate the purposes hereof. The
parties further agree to replace such void or unenforceable provisions with
provisions which will achieve, to the extent possible, the economic, business
and other purposes of the void or unenforceable provisions.
14. Attorneys' Fees. In the event any party to this Agreement initiates
any action, suit, motion, application, arbitration or other proceeding which
concerns the interpretation or enforcement of this Agreement, the prevailing
party in such action, suit, motion, application, arbitration or other
proceeding, or judgment creditor, shall be entitled to recover its costs and
attorneys' fees from the nonprevailing party or judgment debtor, including costs
and fees on appeal, if any.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
THE KEITH COMPANIES, INC.
a California corporation
By: /s/ ARAM H. KEITH
--------------------------------
Its: Chief Executive Officer
AGREED TO this
22nd day of March, 2001
/s/ ERIC C. NIELSEN
- ----------------------------------
Eric C. Nielsen
Approved by the Board of Directors of The Keith Companies, Inc.
on March 20, 2001.