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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM 10-Q
[X] QUARTERLY ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM_______________ TO ________________
COMMISSION FILE NO 001-12211
ECHELON INTERNATIONAL CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 59-2554218
- ---------------------------------------- -------------------------------
(State of incorporation) (I.R.S. Employer
One Progress Plaza, Suite 1500 Identification Number)
St. Petersburg, Florida 33701 Telephone (727) 803-8200
(Address of principal executive offices) (Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Common stock, par value $.01 per share, 6,681,943 shares, as of November
13, 1998
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<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
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<S> <C> <C>
PART I.
Item 1. Financial Statements............................................... 2
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk......... 25
PART II.
Item 4. Submission of Matters to a Vote of Security Holders................ 25
Item 5. Other Information.................................................. 25
Item 6. Exhibits and Reports on Form 8-K................................... 25
Signatures....................................................................... 26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ECHELON INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------ -----------
(UNAUDITED)
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
ASSETS
<S> <C> <C>
REAL ESTATE, LEASES, LOANS & OTHER INVESTMENTS:
Real estate, net (Note 2) ............................................... $171.7 $115.1
Aircraft under operating lease (net of accumulated depreciation of
$9.2 and $8.4 million, respectively) .................................. 3.3 4.1
Leases and loans receivable, net (Note 3) ............................... 198.4 196.3
Investments in and advances to unconsolidated partnerships (Note 7) ..... 22.5 47.2
------ -----
395.9 362.7
------ -----
ASSETS HELD FOR SALE (Note 4) ........................................... 2.3 2.5
------ -----
CURRENT ASSETS:
Cash and equivalents (includes restricted deposits of $1.1 million
and $1.5 million, respectively) ....................................... 9.4 7.8
Marketable securities ................................................... 22.2 42.0
Accounts receivable, net ................................................ 1.0 1.2
Current portion of leases and loans receivable .......................... 43.6 39.8
Inventories, at cost .................................................... .9 1.1
Other ................................................................... .9 1.7
------ -----
Total current assets .......................................... 78.0 93.6
------ -----
OTHER NON-CURRENT ASSETS ................................................ 2.6 1.7
------ -----
Total assets .................................................. $478.8 $460.5
====== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other liabilities .................................. $ 11.0 $ 6.1
Accounts and interest payable to former parent .......................... -- 1.3
Current portion of funding for limited partnership investments (Note 7) . 4.9 9.5
Current portion of deferred income taxes ................................ 14.1 8.4
Current portion of long-term debt (Note 5) .............................. 12.7 12.2
------ -----
Total current liabilities ..................................... 42.7 37.5
LONG-TERM DEBT (Note 5) ................................................. 85.7 64.9
DEFERRED INCOME TAXES ................................................... 133.0 145.8
OTHER LIABILITIES ....................................................... .4 3.2
COMMITMENTS AND CONTINGENCIES (Note 10) ................................
------ -----
Total liabilities ............................................. 261.8 251.4
------ -----
STOCKHOLDERS' EQUITY (Note 6):
Preferred stock, $.01 par value, 10,000,000 shares authorized,
none issued ........................................................... -- --
Common stock, $.01 par value, 25,000,000 shares authorized,
6,884,181 issued and 6,811,243 outstanding in 1998, and 6,785,241
issued and 6,716,722 outstanding in 1997 .............................. .1 .1
Additional paid in capital .............................................. 281.7 279.5
Retained deficit ........................................................ (62.1) (70.5)
Unrealized gain (loss) on available-for-sale securities, net of tax ..... (.2) 1.5
Treasury stock, at cost (72,938 shares in 1998 and 68,519 shares in 1997) (1.6) (1.5)
Unearned compensation ................................................... (.9) --
------ -----
Total stockholders' equity .................................... 217.0 209.1
------ -----
Total liabilities and stockholders' equity .................... $478.8 $460.5
====== =====
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
ECHELON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------- ----------------------
1998 1997 1998 1997
-------- --------- -------- ----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C>
SALES AND REVENUES:
Real estate operations:
Rental, other operations and marina revenues ....................... $ 6.5 $ 5.9 $ 16.4 $ 16.6
Sales of development properties and development rights ............. -- .5 3.1 .8
Equity in losses of limited partnership investments ................ (1.1) (.2) (1.7) (1.0)
Leasing and lending operations:
Earned income on finance and operating leases ...................... 2.2 1.3 4.4 3.6
Interest income .................................................... 1.0 1.4 3.2 5.5
Equity in earnings of unconsolidated partnerships .................. .2 .8 2.7 3.0
Gain on sale of loans .............................................. -- -- -- 4.1
Investment income and realized gain on sale of investments ............. .5 .9 3.5 2.5
------ ------ ------ ------
9.3 10.6 31.6 35.1
------ ------ ------ ------
OPERATING EXPENSES:
Rental, other operations and marina expenses ........................... 4.3 4.7 9.6 12.4
Cost of development properties and development rights sold ............. -- .5 1.6 .8
Depreciation ........................................................... 1.7 1.1 4.4 3.6
Provision for (recovery of) lease, real estate and loan losses ......... -- -- (1.6) (.7)
Interest expense on long-term debt, net of amounts capitalized ......... 1.5 1.9 4.1 7.1
General and administrative ............................................. .9 1.2 6.0 4.9
Other (income) expenses, net ........................................... (.1) (.4) (.1) (1.8)
------ ------ ------ ------
8.3 9.0 24.0 26.3
------ ------ ------ ------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM ...................... 1.0 1.6 7.6 8.8
INCOME TAX (BENEFIT) EXPENSE ........................................... (.3) .2 -- 1.3
------ ------ ------ ------
INCOME BEFORE EXTRAORDINARY ITEM 1.3 1.4 7.6 7.5
EXTRAORDINARY ITEM:
Gain on settlement of debt, net of income tax expense of $.4 million .8 -- .8 --
Loss on extinguishment of debt, net of income tax benefit
of $.1 million and $.5 million, respectively .................... -- (.1) -- (.9)
------ ------ ------ ------
NET INCOME ............................................................. $ 2.1 $ 1.3 $ 8.4 $ 6.6
====== ====== ====== ======
Basic earnings per common share:
Income before extraordinary item ................................... $ .19 $ .20 $ 1.12 $ 1.10
Extraordinary item, net of tax ..................................... .12 (.01) .12 (.13)
------ ------ ------ ------
Net income per common share ........................................ $ .31 $ .19 $ 1.24 $ .97
====== ====== ====== ======
Diluted earnings per common share:
Income before extraordinary item ................................... $ .19 $ .20 $ 1.10 $ 1.10
Extraordinary item, net of tax ..................................... .12 (.01) .12 (.13)
------ ------ ------ ------
Net income per common share ........................................ $ .31 $ .19 $ 1.22 $ .97
====== ====== ====== ======
Basic weighted average shares of common stock outstanding .............. 6.8 6.8 6.8 6.8
====== ====== ====== ======
Diluted weighted average shares of common stock outstanding ............ 6.9 6.8 6.9 6.8
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
ECHELON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
1998 1997
-------- --------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ........................................................... $ 8.4 $ 6.6
Adjustment to reconcile net income to cash provided by operating
activities:
Depreciation and amortization of financing costs ................. 4.6 4.3
Extraordinary (gain) loss on (settlement) extinguishment of debt . (1.2) 1.4
Deferred income taxes ............................................ (7.1) (6.2)
Amortization related to finance leases ........................... (1.8) (1.2)
Provision for (recovery of) lease, loan and real estate losses ... (1.6) (.7)
Stock-based compensation expense ................................. .7 --
Gain on sale of assets ........................................... (3.5) (4.2)
Equity in income of unconsolidated partnerships, net ............. (1.0) (2.0)
Changes in working capital:
Accounts payable and other liabilities ...................... 5.5 (4.3)
Other working capital changes ............................... 1.2 2.4
Other ............................................................ (.5) 4.6
----- -----
3.7 .7
----- -----
INVESTING ACTIVITIES:
Purchases of marketable securities ................................... (7.9) (57.1)
Proceeds from sales of marketable securities ......................... 26.7 15.6
Proceeds from sales and collections of leases and loans .............. 18.4 76.5
Real estate property additions and other capital expenditures ........ (62.0) (7.8)
Net proceeds from sales of real estate properties, development rights
and assets held for sale ........................................... 3.1 .4
Contributions to unconsolidated partnerships ......................... (7.5) (7.3)
Distributions from unconsolidated partnerships ....................... 6.5 9.6
----- -----
(22.7) 29.9
----- -----
FINANCING ACTIVITIES:
Issuance of long-term debt ........................................... 25.2 --
Repayment of long-term debt .......................................... (4.4) (74.2)
Issuance of common stock ............................................. .2 --
Debt issuance costs .................................................. (.3) --
Purchase of treasury stock ........................................... (.1) --
----- -----
20.6 (74.2)
----- -----
Net increase (decrease) in cash and equivalents ........................... 1.6 (43.6)
BEGINNING CASH AND EQUIVALENTS ............................................ 7.8 63.3
----- -----
ENDING CASH AND EQUIVALENTS ............................................... $ 9.4 $ 19.7
===== =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized ............................. $ 4.0 $ 6.7
===== =====
Income taxes, net of refunds ..................................... $ 6.9 $ 7.1
===== =====
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING &
FINANCING ACTIVITIES:
Distribution of note receivable by unconsolidated affiliate .......... $ -- $ 3.0
===== =====
Distribution of net assets by unconsolidated partnership ............. $ 19.1 $ --
===== =====
Issuance of common stock related to LTIP ............................. $ .4 $ --
===== =====
Change in unrealized gain (loss) on available-for-sale securities,
net of tax effect of $1.0 million in both 1998 and 1997 ........... $ (1.7) $ 1.9
===== =====
Delayed equity amortization on leveraged leases ...................... $ 1.2 $ 1.2
===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-4-
<PAGE>
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying consolidated financial
statements include all adjustments deemed necessary to summarize fairly and
reflect the financial position and results of operations of Echelon
International Corporation ("Echelon" or the "Company") for the interim periods
presented. Results of the third quarter of 1998 are not necessarily indicative
of results for the full year. These consolidated financial statements should be
read in conjunction with the financial statements and notes thereto in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Certain amounts previously reported in the Form 10-Q for the three and nine
months ended September 30, 1997 have been reclassified to conform to the 1998
presentation.
(2) REAL ESTATE
The depreciable lives and carrying values of the Company's real estate are
as follows:
<TABLE>
<CAPTION>
DEPRECIABLE SEPTEMBER 30, DECEMBER 31,
LIVES (YEARS) 1998 1997
------------- ---- ----
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C>
Real estate held for and under development:
Land and land improvements.................... $ 37.1 $ 31.7
Construction in progress...................... 26.6 3.8
------ -------
63.7 35.5
------ ------
Income producing real estate:
Land and land improvements.................... 16.5 15.2
Buildings and improvements.................... 5-40 107.1 78.0
Equipment and other........................... 3-10 4.2 2.9
------- -------
127.8 96.1
----- ------
191.5 131.6
Less: accumulated depreciation.................... 19.8 16.5
------ ------
$171.7 $115.1
===== =====
</TABLE>
Capitalized interest during the development of specific projects was $1.1
million and $.2 million during the nine months ended September 30, 1998 and the
year ended December 31, 1997, respectively.
-5-
<PAGE>
(3) LEASES AND LOANS RECEIVABLE
At September 30, 1998 and December 31, 1997, investments in leases and
loans receivable are as follows:
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------ -----------
(UNAUDITED)
(IN MILLIONS)
Finance leases:
Rentals receivable ............ $ 177.6 $ 169.2
Unguaranteed residual values .. 106.9 105.6
Guaranteed residual values .... 6.0 6.0
Unearned income ............... (56.9) (56.4)
Deferred investment tax credits (12.2) (13.3)
------ ------
Total finance leases ...... 221.4 211.1
Commercial finance loans receivable 39.1 45.1
Allowance for losses .............. (18.5) (20.1)
------ ------
242.0 236.1
Less: current portion ............. 43.6 39.8
------ ------
$ 198.4 $ 196.3
====== ======
Finance leases consist of direct finance leases and leveraged lease
investments, primarily in aircraft. The majority of the leases have remaining
terms of 7 to 12 years, with one lease currently scheduled to mature in 20
years. Rentals receivable from leveraged leases represent unpaid rentals less
principal and interest on nonrecourse third-party debt. The Company's share of
rentals receivable is subordinate to the debt holders who have security
interests in the leased assets.
The Company's commercial finance loans are secured by first mortgage liens
on the related commercial real estate or by security interests in aircraft.
These loans are further collateralized, where applicable, by an assignment to
the Company of the borrowers' lease agreements, and, in some cases, third party
guaranties.
During June 1998, the Company received complete repayment on a $3.0 million
real estate loan that was considered to be impaired. As a result of the loan
payoff, Echelon reversed the $1.6 million allowance for losses on leases and
loans previously recorded.
As of July 31, 1998, a joint venture in which Echelon had a 50% interest
was dissolved and the Company received net assets totaling $19.1 million. The
net assets were recorded by the Company and represent the components of a direct
finance lease for an aircraft leased to Continental Airlines through February
2002.
During August 1998, the Company sold two aircraft engines which were in the
Company's leveraged lease portfolio. The sale of the aircraft engines and the
termination of the leveraged lease resulted in after-tax income of $.4 million
to the Company.
On November 3, 1998, the Company executed an extension and rate adjustment
on a direct finance lease for the aircraft leased to Southwest Airlines. The
lease was originally scheduled to mature in June 2004. The amended lease
agreement will extend the maturity of the lease through June 2008. The lease
extension was negotiated in order to utilize the lease as collateral for the
funding of the Company's open market Common Stock buyback. Any remaining
proceeds will be used to fund the development projects currently in the
Company's pipeline. See further discussion of the loan in Note 5, "Long-Term
Debt" and the Company's open market Common Stock buyback in Note 13, "Subsequent
Events".
-6-
<PAGE>
(4) ASSETS HELD FOR SALE
During the quarter ended September 30, 1998, the Company sold property
classified as an asset held for sale at its net book value of $.2 million.
(5) LONG-TERM DEBT
The Company's long-term debt outstanding is as follows:
<TABLE>
<CAPTION>
INTEREST SEPTEMBER 30, DECEMBER 31,
RATE 1998 1997
---- ---- ----
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C>
Northwestern Mutual Life Insurance Company ....... 6.98% $55.6 $45.0
Salomon Brothers Realty Corp...................... 7.13%(a) 12.9 13.0
SouthTrust Bank................................... 7.26%(a) 13.6 -
Delayed equity obligation on finance lease........ 10.00% 16.3 18.5
Other............................................. - - 0.6
------- -----
98.4 77.1
Less: current portion of long-term debt........... 12.7 12.2
---- ----
$85.7 $64.9
==== ====
<FN>
(a) Interest rate at September 30, 1998.
</FN>
</TABLE>
In July 1997, the Company closed on a $16.5 million construction loan
at an interest rate of LIBOR plus 1.60% per annum which is being utilized to
fund development of ECHELON AT BAY ISLE KEY, a 369-unit multi-family residential
community on land the Company owns in the Gateway area of Tampa Bay, Florida.
During the nine months ended September 30, 1998, the Company made construction
draws on this loan totaling $13.6 million. The initial term of the construction
loan is two years, with the ability to extend the loan for an additional five
years from the completion of construction. Teacher's Insurance and Annuity
Association of America ("TIAA") has committed to provide the permanent financing
for this development, as discussed below.
In April 1998, the Company closed on a $18.6 million construction loan at
an interest rate of LIBOR plus 1.50% per annum which will be utilized to fund
the development of ECHELON AT THE RESERVE, a 314-unit multi-family residential
community on land that the Company owns in CARILLON PARK in the Gateway area of
Tampa Bay, Florida. As of September 30, 1998, Echelon had not made any
construction draws on this loan. The Company will begin making construction
draws after the Company's initial equity funding of $6.2 million of the
construction costs, including a $2.2 million land contribution. The initial term
of the construction loan is three years, with the ability to extend the loan for
an additional two years from the completion of construction. TIAA has committed
to provide the permanent financing for this development, as discussed below.
In May 1998, the Company executed an amendment to the Salomon Brothers
Realty Corp. loan which increased the amount of available credit on the existing
loan to $30.0 million and reduced the interest rate on the entire loan to LIBOR
plus 1.50% per annum. The loan is secured by Echelon's real estate loan
portfolio and a commercial property, BAYBORO STATION.
The entire loan matures May 2000 with the ability to extend through May 2002.
In May 1998, the Company executed a commitment letter with AmSouth Bank for
a $50.0 million Advised Guidance Line of Credit. The proceeds from the line of
credit will be used to provide the construction financing for multi-family and
commercial projects in the Company's pipeline, as approved by AmSouth Bank. Each
project financed under the line of credit will be a separate loan. The interest
rate for each loan will be the lesser of the prime rate of interest or the LIBOR
rate plus a defined number of basis points per annum. The term for each
multi-family loan is 36 months and for each commercial loan is 30 months. The
repayment terms of the loans are interest only,
-7-
<PAGE>
with the entire principal and any accrued interest due at the maturity of the
loans.
To date, the Company has closed on three loans under the AmSouth Bank $50.0
million Advised Guidance Line of Credit Agreement discussed above. The first
loan, in the amount of $10.9 million, provides construction financing for
CASTILLE AT CARILLON. The second loan, in the amount of $11.3 million, provides
construction financing for ECHELON AT WOODLAND Park. A third loan, in the amount
of $17.2 million, provides construction financing for ECHELON AT NORTHLAKE. As
of September 30, 1998, the Company has not made any construction draws on these
loans.
In May 1998, Echelon also executed a commitment letter with TIAA for a
$55.5 million loan at an interest rate of 7.15% per annum. The proceeds of the
loan are to be used for the permanent financing of four specific projects. The
loan is secured by the projects and funding will occur for each project based on
specific conditions. Each disbursement will constitute a separate loan that will
mature 10 years from the date of the first loan disbursement. The first loan
disbursement requires interest-only payments for the first 12 months and monthly
principal and interest payments based on a 30-year amortization schedule. The
remaining loans require monthly principal and interest payments based on a
30-year amortization schedule. Under the terms of the commitment, TIAA required
the Company to remit a refundable application fee. The Company negotiated to
provide stand-by letters of credit in lieu of the application fee, which will be
reduced as the loans are funded. As of September 30, 1998, Echelon has a total
of $1.1 million of certificates of deposits securing these letters of credit.
The Company has not closed on any loans with TIAA as of September 30, 1998.
In August 1998, the Company closed on a loan amendment with Northwestern
Mutual Life Insurance Company which increased the amount of the existing loan by
$11.0 million and reduced the interest rate on the entire loan to 6.98% per
annum. The increase in the loan is secured by two commercial properties in
Echelon's real estate portfolio, CENTRAL STATION and MCNULTY PARKING GARAGE. The
entire loan matures seven years from the date of closing.
In August 1998, the Company successfully negotiated a modification in an
agreement with the University of Florida Foundation, Inc. As a result of the
modification, a long-term debt obligation and related accrued interest were
cancelled, which resulted in a $.8 million after-tax extraordinary gain to the
Company. See further discussion included in Note 12, "Extraordinary Items".
On November 3, 1998, the Company closed on a $13.0 million loan from Fleet
Capital Corporation. The loan is at a 5.99% fixed rate of interest and matures
June 2008. The proceeds of the loan will be used to fund the Company's open
market Common Stock buyback. Any remaining proceeds will be used to fund the
development projects currently in the Company's pipeline. The loan is secured
by Echelon's direct finance lease with Southwest Airlines, as discussed in Note
3, "Lease and Loans Receivable". See discussion of the Company's open market
Common Stock buyback included in Note 13, "Subsequent Events".
(6) STOCKHOLDERS' EQUITY
During the nine months ended September 30, 1998, the Company had the
following stockholders' equity related transactions:
/bullet/ Issuance of 90,181 shares of restricted Common Stock under the
Echelon International Corporation Long-Term Incentive Plan ("LTIP")
in accordance with executive employment contracts. In conjunction
with the issuance of the restricted Common Stock, the Company
recorded $1.6 million of unearned compensation and subsequently
recognized $.7 million of compensation expense during the nine
months ended September 30, 1998. The unearned compensation will be
amortized as compensation expense over the vesting period of the
restricted Common Stock.
/bullet/ Issuance of 146,500 stock options under the LTIP and the Echelon
International Corporation 1996 Stock Option Plan ("SOP"). The stock
options were granted at market value on the date of grant. The stock
options granted under the LTIP are performance based options which
cliff vest at the end of nine
-8-
<PAGE>
years with a provision for early vesting if certain performance
goals are achieved. The stock options granted under the SOP vest
over five years.
/bullet/ Issuance of 6,921 shares of Common Stock in conjunction with the
Echelon International Corporation Employee Stock Purchase Plan.
/bullet/ Issuance of 1,838 shares of Common Stock and 4,000 stock options
under the Echelon International Corporation Non-Employee Directors'
Stock Plan.
/bullet/ Repurchase of 4,419 shares of Common Stock, which resulted in
additional treasury stock, at cost, of $.1 million.
The net income and common shares used to compute basic and diluted earnings
per share is presented in the following table:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------ ------------------
1998 1997 1998 1997
------ ------ ------ -------
(Unaudited) (Unaudited)
(In millions, except per share amounts)
<S> <C> <C> <C> <C>
BASIC
Weighted average number of shares:
Average common shares outstanding 6.8 6.8 6.8 6.8
===== ===== ===== =====
Net income used to compute basic earnings per share:
Net income $ 2.1 $ 1.3 $ 8.4 $ 6.6
===== ===== ===== =====
Basic earnings per common share $ .31 $ .19 $ 1.24 $ .97
===== ===== ===== =====
DILUTED
Weighted average number of shares:
Average common shares outstanding 6.8 6.8 6.8 6.8
Dilutive effect for stock options and
contingently issuable common shares .1 -- .1 --
----- ----- ----- -----
Weighted average shares 6.9 6.8 6.9 6.8
===== ===== ===== =====
Net income used to compute diluted earnings per share:
Net income $ 2.1 $ 1.3 $ 8.4 $ 6.6
===== ===== ===== =====
Diluted earnings per common share $ .31 $ .19 $ 1.22 $ .97
===== ===== ===== =====
</TABLE>
See discussion of the Company's open market Common Stock buyback included
in Note 13, "Subsequent Events".
(7) CONDENSED STATEMENTS OF INCOME AND DISCLOSURES OF UNCONSOLIDATED
PARTNERSHIPS
As of July 31, 1998, a joint venture in which the Company had a 50%
interest was dissolved and the Company received net assets totaling $19.1
million. Presented below is summarized financial information for this aircraft
equipment and leasing joint venture for the three and nine months ended
September 30, 1998 and 1997, respectively. Amounts reflect 100% of the joint
venture's balances and results of its operations through July 31, 1998, the date
of dissolution.
-9-
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
(In millions)
(Unaudited)
<S> <C> <C> <C> <C>
Revenues....................... $294 $1,719 $5,369 $4,589
Expenses....................... 5 129 35 381
----- ------ ------ ------
Net income..................... $289 $1,590 $5,334 $4,208
=== ===== ===== =====
</TABLE>
The joint venture's revenues for the nine months ended September 30, 1998
include a $3.2 million gain on the sale of two aircraft engines.
The Company's investments in affordable housing investments through limited
partnerships range between a total ownership percentage of 7.1% to 11.6% as of
both September 30, 1998 and December 31, 1997. The Company accounts for its
investments in these limited partnerships by the equity method of accounting.
Echelon recorded losses of $1.7 million and $1.0 million on these investments
for the nine months ended September 30, 1998 and 1997, respectively.
During 1997, Echelon signed commitments to provide total capital
contributions of $25.8 million to affordable housing tax credit limited
partnerships. Echelon had funded $13.4 million of these commitments as of
December 31, 1997 and has funded an additional $7.5 million of the commitments
during the nine months ended September 30, 1998.. The total commitments of $25.8
million are included as investments in unconsolidated partnerships in the
Company's consolidated balance sheets. As of September 30, 1998, remaining
commitments totaling $4.9 million are to be funded within one year and are
included in the current portion of funding for limited partnership investments
on the consolidated balance sheet. The Company's overall investment return
includes both the tax benefits resulting from the losses on these investments
and the realization of the housing tax credits on these investments.
(8) EFFECTIVE INCOME TAX RATE
The Company's effective income tax rate differs from the statutory income
tax rate primarily due to tax credits related to the Company's investment in
affordable housing limited partnerships, amortization of investment tax credits
related to the Company's leveraged lease portfolio, and differences in rates
between previously deferred taxes and current effective tax rates.
(9) RELATED PARTY TRANSACTIONS
In April 1998, the Board of Directors approved an interest-free loan
program for Executive Officers for the purpose of assisting the Executive
Officers in meeting tax liabilities associated with the lapse of restrictions on
restricted Common Stock. During May 1998, the Company funded $.3 million to two
Executive Officers in conjunction with this loan program. The promissory notes
from the Executive Officers mature in April 2003. The Company recognized $.1
million in salary expense in conjunction with the issuance of these promissory
notes.
(10) COMMITMENTS AND CONTINGENCIES
The Company is subject to regulation with respect to the environmental
effects of its operations. The Company's disposal of hazardous waste through
third party vendors may result in costs to clean up facilities found to be
contaminated. Federal and state statutes authorize governmental agencies to
compel responsible parties to clean up certain abandoned or uncontrolled
hazardous waste sites. The Company may be responsible for environmental cleanup
at certain sites. Based on information currently available to the Company,
Echelon estimates that its share of liability for cleaning up these sites ranges
from $.1 million to
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<PAGE>
$1.0 million, and has reserved $.2 million for potential costs. Management
currently believes that the ultimate outcome of these matters will not have a
material adverse effect upon the Company's results of operations, financial
condition or liquidity.
The Company is currently involved in the construction of several commercial
projects and multi-family residential communities and had outstanding
construction commitments with contractors with remaining amounts totaling $30.1
million at September 30, 1998.
As of September 30, 1998, Echelon had a total of 10 contingent contracts,
letters of intent or joint venture agreements, subject to the Company's final
due diligence, to acquire land for the development of an estimated 2,792
multi-family residential units at an aggregate estimated development cost of
$250.0 million.
Through a previous partnership, the Company remains contingently liable for
first mortgage bonds issued to residents of the life care communities owned by
the former partnership. The contingent liability reduces over time as those who
were residents at the time of the sale of the Company's interest discontinue
their residency. If the current owners fail to perform their obligations and if
the partnership assets, consisting primarily of land and buildings, were
worthless, the Company could be liable for an additional $26.5 million as of
December 31, 1997. The Company considers the incurrence of this liability to be
remote based on asset values and the indemnification agreement from the current
owners to the Company.
(11) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting comprehensive
income. SFAS No. 130 defines comprehensive income as the change in equity of an
enterprise except those resulting from stockholder transactions. All components
of comprehensive income are required to be reported in a new financial statement
that is displayed with equal prominence as existing financial statements. The
Company adopted this standard as of January 1, 1998.
<TABLE>
<CAPTION>
STATEMENT OF COMPREHENSIVE INCOME
THREE MONTHS NINE MONTHS ENDED
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
(In millions)
(Unaudited)
<S> <C> <C> <C> <C>
Net income $2.1 $1.3 $8.4 $6.6
--- --- --- ---
Other comprehensive income, net of tax:
Change in unrealized holding gain (loss) on available-
for-sale securities during period................. (.7) 1.0 .1 1.9
Less: reclassification adjustment for realized
gains included in net income...................... - - (1.8) -
--- --- --- ---
Other comprehensive income........................ (.7) 1.0 (1.7) 1.9
--- --- --- ---
Comprehensive income $1.4 $2.3 $6.7 $8.5
=== === ==== ===
</TABLE>
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which established accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The Company will be
required to adopt this standard for the quarter ended September 30, 1999 and
based on current circumstances, does not believe the application of the new
rules will have a material impact on the Company's consolidated financial
statements.
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<PAGE>
(12) EXTRAORDINARY ITEMS
In August 1998, the Company successfully negotiated a modification in an
agreement with the University of Florida Foundation, Inc. ("Foundation"). As a
result of the modification, a $.6 million long-term debt obligation owed by the
Company and $.6 million of related accrued interest were cancelled by the
Foundation, resulting in a $.8 million after-tax extraordinary gain to the
Company. As a condition of the modification, Echelon constructed roads and other
infrastructure totaling $.6 million on Company-owned land in the Progress Center
Office Park. The infrastructure enhances both the Company's land and provides
additional access to Foundation-owned land.
During the nine months ended September 30, 1997, the Company recorded an
after-tax extraordinary loss of $(.9) million on the write-off of $1.3 million
of financing costs related to the early extinguishment of debt.
(13) SUBSEQUENT EVENTS
On October 8, 1998, Echelon announced that the Company's Board of Directors
authorized up to $15.0 million for the purchase of the Company's outstanding
Common Stock in both the open market and privately negotiated transactions, as
market conditions allow.
As of November 13, 1998, the Company has repurchased and settled 129,300
shares of Common Stock, which results in additional treasury stock, at cost, of
$2.6 million.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Echelon International Corporation is a real estate company which develops,
owns and manages commercial and multi-family residential real estate (the "Real
Estate Business"). The Company also owns and manages a portfolio of financial
assets consisting primarily of leased aircraft and other assets and
collateralized financing of commercial real estate and aircraft (the "Leasing
and Lending Business"). Echelon is continuing to withdraw from the aircraft and
real estate lending business to focus on its core real estate operations.
Prior to December 18, 1996 ("Distribution Date"), the Company operated as a
wholly-owned subsidiary of Florida Progress Corporation ("Florida Progress").
Effective on the Distribution Date, Florida Progress distributed the Company's
stock to Florida Progress shareholders (one share of the Company for each
fifteen shares of Florida Progress) as a tax-free dividend (the "Distribution").
The Distribution established the Company as a publicly held corporation,
separate from Florida Progress.
The Company's operations for the nine months ended September 30, 1998
include the following transactions related to the Company's ongoing multi-family
residential and commercial development activities:
/bullet/ The sale of 6.57 acres of land in CARILLON PARK for $2.7 million,
resulting in a pre-tax gain of $1.1 million.
/bullet/ The purchase of the land for the development of ECHELON AT
NORTHLAKE, a 256-unit multi-family residential community in Atlanta,
Georgia, at a cost of $4.0 million. Construction of the development
began in November 1998.
/bullet/ The purchase of the land for the development of ECHELON AT WOODLAND
PARK, a 232-unit multi-family residential community in Tulsa,
Oklahoma, at a cost of $1.0 million. Construction of the development
began in September 1998.
/bullet/ The purchase of land for the development of ECHELON AT MEMORIAL
CREEK, a 292-unit multi-family residential community in Tulsa,
Oklahoma, at a cost of $1.6 million. Construction is planned to
begin in the fourth quarter of 1998.
/bullet/ The ongoing construction of three multi-family residential
communities, ECHELON AT BAY ISLE KEY and ECHELON AT THE RESERVE,
both located in the Gateway Area of Tampa Bay, Florida, and ECHELON
AT WOODLAND PARK, located in Tulsa, Oklahoma, and construction and
tenant improvements on two commercial projects; MCNULTY PARKING
GARAGE and CASTILLE AT CARILLON. Construction and tenant
improvements on two additional projects, BAYBORO Station and CENTRAL
STATION are complete as of September 30, 1998. Total capital
expenditures for construction and tenant improvements were $61.0
million during the nine months ended September 30, 1998.
The Company's operations for the nine months ended September 30, 1998 also
include the following nonrecurring events and transactions:
/bullet/ The sale of two aircraft engines by Progress Potomac Capital
Ventures ("PPCV"), in which Echelon had a 50% interest, for $5.7
million, resulting in a pre-tax gain of $1.6 million to Echelon.
/bullet/ The collection of a real estate loan receivable from Madison
Building, Inc. The loan receivable was originally scheduled to
mature in November 1998. As a result of the loan payoff, Echelon
reversed the $1.6 million allowance for losses on leases and loans
previously recorded.
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<PAGE>
/bullet/ The payoff of a $2.3 million deferred rent note receivable from
Continental Airlines. The deferred note receivable was originally
scheduled to mature in 2000.
/bullet/ The receipt of $19.1 million in net assets from the dissolution of
the PPCV joint venture in which Echelon had a 50% interest. The net
assets represent the components of a direct finance lease for an
aircraft leased to Continental Airline through February 2002.
/bullet/ The sale of two aircraft engines to United Technologies, Inc. and
the termination of the related leveraged lease, resulting in
after-tax income of $.4 million.
/bullet/ The settlement of a $.6 million long-term debt obligation and
related accrued interest of $.6 million, resulting in an after-tax
extraordinary gain of $.8 million.
Because of the Company's on-going execution of targeted strategies,
including dispositions of non-strategic assets and pursuit of additional
strategic initiatives made possible by the earlier than expected repayment of
debt, the results of operations in the third quarter and first nine months of
1998 are not necessarily indicative of future results.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 1997
Net income for the three and nine months ended September 30, 1998 was $2.1
million or $.31 for both basic and diluted earnings per share, and $8.4 million
or $1.24 basic and $1.22 diluted earnings per share, respectively. This compares
to net income of $1.3 million or $.19 basic and diluted earnings per share and
$6.6 million or $.97 basic and diluted earnings per share for the same periods
in 1997.
REVENUES
Sales and revenues for the three and nine months ended September 30, 1998
decreased $1.3 million and $3.5 million, respectively, over the same periods in
1997. The decrease in sales and revenues is primarily due to the $4.1 million
decrease in gain on sale of loans for the nine months ended September 30, 1998
in comparison with the same period of 1997.
Rental, other operations and marina revenues for first nine months of 1998
decreased $.2 million compared to the same period in 1997 primarily due to $3.2
million decrease in marina revenues resulting from the Company's decision to
discontinue the sale of boats as a component of marina operations. This decrease
is offset by a $3.0 million increase in rental revenues which resulted from an
overall increase in occupancy and rental rates for the Company's commercial
properties, the 100% occupancy of the Company's commercial properties completed
during 1998, BAYBORO STATION and CENTRAL STATION and the opening of the
Company's first multi-family residential community, ECHELON AT BAY ISLE KEY, in
late April 1998.
Sales of development properties and development rights in the first nine
months of 1998 were $3.1 million compared to $.8 million in the first nine
months of 1997. The increase in the sales of development properties and
development rights resulted from the sales of land and development rights in
CARILLON PARK in the first nine months of 1998. The CARILLON PARK land sale was
to an existing owner for land contiguous to the owner's land holdings. The sale
of development rights in CARILLON PARK was also to an existing owner for further
development on the owner's land holdings. Echelon intends to develop much of the
unsold CARILLON PARK land for its own account and, if and when market conditions
warrant, to possibly market the remaining land to third parties.
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<PAGE>
As part of Echelon's strategy to focus on real estate development, Echelon
has investments in affordable housing developments entitled to the benefits of
housing tax credits. The Company's overall investment return includes both the
tax benefits resulting from the losses on these investments and the realization
of the housing tax credits on these investments. Equity in losses of real estate
partnerships reduced revenue for each of the three and nine months ended
September 30, 1998 and 1997 by $1.1 million and $1.7 million, and $.2 million
and $1.0 million, respectively, as a result of the Company recording its share
of losses from housing tax credit limited partnerships. The Company recorded
$.8 million and $2.1 million in tax credits for the three and nine months ended
September 30, 1998, respectively, as reduction of income tax expense.
Earned income on finance and operating leases increased $.8 million for the
nine months ended September 30, 1998 as a result of the sale of two leveraged
lease aircraft engines. The sale of the aircraft engines and the termination of
the related leveraged lease resulted in additional revenues of $.6 million to
the Company. In addition, $.3 million of lease revenues were recorded from the
direct finance lease the Company received from the dissolution of a joint
venture as of July 31, 1998. Prior to July 31, 1998, the income from the joint
venture was reported in the "Equity in Earnings of Unconsolidated Partnerships"
income statement line item.
Interest income from leasing and lending operations for the nine months
ended September 30, 1998 decreased by $2.3 million compared to the first nine
months of 1997 as a result of the sales and payoffs of loans receivable as the
Company continues to execute its strategy to liquidate non-strategic assets and
redirect the capital to real estate development and acquisition.
Equity in earnings of unconsolidated partnerships decreased $.6 million and
$.3 million, respectively, in the three and nine months ended September 30, 1998
as compared to the same periods in 1997. The decrease for the three and nine
months ended September 30, 1998 is due primarily to the dissolution of the joint
venture partnership in which Echelon had a 50% interest as of July 31, 1998. The
decrease for the nine months ended September 30, 1998 is offset by the $1.6
million pretax gain on the sale of an asset in January 1998 in this joint
venture. Equity in earnings of unconsolidated partnerships in the first nine
months of 1997 included $.9 million from a pretax gain on the sale of an asset
in a partnership in which Echelon had approximately a 26% interest. As of
December 31, 1997, the Company had no ownership interest in this partnership.
During the nine months ended September 30, 1998, there were no gains on
sales of loans. The gain on sale of loans of $4.1 million in the nine months
ended September 30, 1997 was the result of the recognition of a deferred gain on
loans receivable that were sold.
Investment income and realized gain on sale of investments increased $1.0
million for the nine months ended September 30, 1998 in comparison with the same
period of 1997 primarily as a result of $1.8 million of net gains on sales of
marketable securities during the nine months ended September 30, 1998.
OPERATING EXPENSES
Operating expenses for the three and nine months ended September 30, 1998
decreased by $.7 million and $2.3 million, respectively, compared to the same
periods in 1997.
Rental, other operations and marina expenses decreased $2.8 million during
the nine months ended September 30, 1998 as compared to the same period in 1997
primarily due to the Company's decision to discontinue the sale of boats, as
discussed above.
The provision for (recovery of) lease, loan and real estate losses was
$(1.6) million for the nine months ended September 30, 1998 as a result of
complete repayment of a real estate loan for which the Company had previously
recorded a $1.6 million allowance for loan losses.
Interest expense, net of amounts capitalized, decreased $.4 million and
$3.0 million during the three
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<PAGE>
and nine months ended September 30, 1998, respectively, compared to the same
periods 1997 due to the reduction of debt resulting from loan receivable sales
and payoffs, asset sales and the refinancing of a significant portion of the
Company's debt at lower interest rates throughout the fourth quarter of 1997 and
the first nine months of 1998.
General and administrative expenses were $.9 million and $6.0 million in
the three and nine months ended September 30, 1998, respectively, compared to
$1.2 million and $4.9 million in the same periods of 1997. This represents an
increase of $1.1 million during the nine months ended September 30, 1998 as
compared to the same period in 1997. General and administrative expenses for the
first nine months of both 1998 and 1997 include the full year accrual of
management incentive and long-term incentive compensation as a result of the
Company achieving the annual 1998 and 1997 goals in the first quarter of each of
the years, respectively. In addition, during the formation of the Company's
multi-family and commercial pipeline of potential projects, certain costs were
appropriately expensed rather than capitalized. As specific projects are
approved, costs related to these projects have been, and will continue to be,
capitalized.
Other income of $1.8 million in the nine months ended September 30, 1997
was primarily as a result of a $1.3 million gain related to the sale of the
Company's interest in a previously written-off oil rig lease.
EXTRAORDINARY ITEMS
In August 1998, the Company settled a long-term obligation with the
University of Florida Foundation, Inc. In conjunction with the settlement, a $.6
million long-term debt obligation and related accrued interest of $.6 million
were cancelled, resulting in a $.8 million after-tax extraordinary gain to the
Company.
During the nine months ended September 30, 1997, the Company recorded an
after-tax extraordinary loss of $(.9) million on the write-off of $1.3 million
of financing costs related to the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES OF LIQUIDITY
The Company's sources of liquidity have been primarily from the continued
maturity and collection of Echelon's loan portfolio, proceeds from the sale of
certain non-strategic assets, operating cash flow and, with respect to Echelon's
real estate development, from project-based and other financings. Future sources
of funds may also come from the capital markets.
At the Distribution Date, Echelon and Florida Progress entered into a
distribution agreement, which requires Echelon to maintain liquidity levels of
at least $25.0 million and $17.0 million throughout 1998 and 1999, respectively.
CASH FLOW PROVIDED BY OPERATING ACTIVITIES
Cash flow provided by operating activities was $3.7 million for the nine
months ended September 30, 1998. The primary source of cash was an increase in
accounts payable and other liabilities of $5.5 million and an increase in other
working capital changes of $1.2 million. The primary use of $7.1 million of cash
related to previously deferred tax liabilities becoming due and payable as a
result of collections of lease payments. Deferred income taxes from leveraged
leasing activities, which are reflected in cash flows from operating activities,
are offset by related collections from lessees, which are included in cash flows
from investing activities. Future net cash flows from operations are generally
expected to be reinvested in the Real Estate Business.
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<PAGE>
CASH FLOW USED IN INVESTING ACTIVITIES
Echelon's net cash flow used in investing activities for the first nine
months of 1998 was $22.7 million. The foregoing cash flows reflect the $18.4
million in proceeds received from the collection of leases and loans. The
collection of leases and loans includes $2.3 million from Continental Airlines
for the payoff of a deferred rent note receivable originally scheduled to mature
in 2000, $3.0 million from Madison Building, Inc. for the payoff of a real
estate loan originally scheduled to mature in November 1998 and $3.5 million for
the sale of two aircraft engines which were in the Company's leveraged lease
portfolio. Upon the maturity and collection of Echelon's loan portfolio, Echelon
expects investing activities to continue to be a net use of funds as Echelon
continues to build the Real Estate Business. Purchases of marketable securities,
including debt securities with maturities greater than three months, were $7.9
million and proceeds from sales of marketable securities were $26.7 million
during the nine months ended September 30, 1998.
Real estate property additions and other capital expenditures of $62.0
million for the nine months ended September 30, 1998 were primarily for the
ongoing construction of two multi-family residential communities, ECHELON AT BAY
ISLE KEY and ECHELON AT THE RESERVE, the three land purchases for the
development of ECHELON AT NORTHLAKE, ECHELON AT WOODLAND PARK and ECHELON AT
MEMORIAL CREEK, and construction and tenant improvements on four commercial
projects, BAYBORO STATION, CENTRAL STATION, MCNULTY GARAGE and CASTILLE AT
CARILLON. For the remainder of 1998, capital expenditures for tenant
improvements, land development, commercial office development and multi-family
residential development are projected to be approximately $20.0 million to $40.0
million. These expenditures are expected to be funded through project-based and
other financings and from existing cash and marketable securities.
CASH FLOW FROM FINANCING ACTIVITIES
During the nine months ended September 30, 1998, the Company's primary
sources of financing activities were proceeds of $11.0 million from the increase
in the Northwestern Mutual Life Insurance Company loan and construction draws on
the ECHELON AT BAY ISLE KEY construction loan of $13.6 million. The Company also
made scheduled loan repayments on the Company's outstanding debt of $4.4 million
during the first nine months of 1998.
The Company is currently involved in the construction of several commercial
projects and multi-family residential communities and had outstanding
construction commitments with contractors with remaining amounts totaling $30.1
million at September 30, 1998.
As of September 30, 1998, Echelon had a total of 10 contingent contracts,
letters of intent or joint venture agreements subject to the Company's final due
diligence, to acquire land for the development of an estimated 2,792
multi-family-residential units at an aggregate estimated development cost of
$250.0 million. No assurance can be given that Echelon will acquire this land or
develop the multi-family residential units.
OFF-BALANCE SHEET RISK
Through a previous partnership, Echelon remains contingently liable for
first mortgage bonds issued to residents of the life care communities owned by
such partnership. The contingent liability reduces over time as those who were
residents at the time of the sale of Echelon's partnership interest discontinue
their residency. If the current owners were to fail to perform their obligations
and if the partnership assets, consisting primarily of land and buildings, were
worthless, Echelon could be liable for an additional $26.5 million as of
December 31, 1997. Echelon considers the incurrence of this liability to be
remote based on asset values and the indemnification agreement from the current
owners to Echelon.
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<PAGE>
YEAR 2000 COMPUTER ISSUE
Many computer systems currently in use were designed and developed using
two digits, rather than four, to identify the year. As a result, such computer
systems will recognize the year 2000 as "00". This could cause many computer
applications to fail completely or to create erroneous results unless corrective
measures are taken.
Echelon has several projects underway to address the Year 2000 issue. These
projects include: 1) identifying and mitigating Year 2000 problems in Echelon's
systems, including equipment used in the Company's properties, such as the
elevators and phone systems that may have date sensitive information within
them, 2) working with the Company's financial institutions, lenders, lessees of
aircraft and vendors to assure that the appropriate steps are being taken to
mitigate the Year 2000 issue in each entity's software systems, and 3) ensuring
that each entity that electronically receives or sends information to Echelon is
aware of the steps that the Company is taking and is taking appropriate steps of
its own to address the Year 2000 issue.
To date, Echelon has incurred costs of $.3 million for the acquisition and
implementation of a real estate property management and general ledger software
that is Year 2000 compliant. These costs were capitalized consistent with
Echelon's accounting policies.
Echelon is currently Year 2000 compliant with some software systems and
expects to be compliant with all other software systems no later than the end of
the third quarter of 1999. Costs related to the maintenance and or modification
of Echelon's software systems has been, and will continue to be, expensed as
incurred. Echelon does not anticipate the costs related to Year 2000 to have a
material impact on its results of operations. While the Company currently
expects that the Year 2000 will not pose significant operational problems,
delays in the modification of software systems or failure to fully identify all
Year 2000 dependencies in the Company's software systems could result in
material adverse consequences, including disruption of operations, loss of
information, and unanticipated increases in costs.
GENERAL OVERVIEW OF STRATEGIC PLAN
The overriding objective of the Echelon management team, and of all
Echelon's employees, is to create superior long-term value for stockholders.
To achieve this objective, Echelon will grow its real estate assets and
operations through the execution of targeted strategies. While these targeted
strategies evidence the Company's best decisions to date, the strategies, to the
degree possible, provide the flexibility to be recast to deal with changing
economic conditions, capital market fluctuations, business cycles and other
market conditions. Echelon continuously evaluates its strategic direction
against both short-term and long-term real estate and capital market indicators.
In consideration of the current real estate market conditions, coupled with
the Company's opportunity to repurchase Echelon Common Stock at an attractive
discount to book value, Echelon has expedited its strategic initiatives to
attract joint venture, merchant build and presale opportunities for some of the
current multi-family projects in the Company's pipeline.
The Company has decided to take advantage of the current equity market
opportunity to repurchase up to $15.0 million of the Company's outstanding
Common Stock. The Board of Directors believes that the current market price for
the Company's Common Stock is not reflective of its true value, which makes this
buy-back program an excellent investment to build long-term stockholder value.
As of November 13, 1998, the Company has repurchased and settled 129,300 shares
of Common Stock, at a total cost to the Company of $2.6 million.
The section below updates and summarizes Echelon's current strategies.
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<PAGE>
MULTI-FAMILY
As previously communicated, multi-family residential development has been
identified as the primary driver of Echelon's growth over the next five years.
During the next five years, Echelon expects to develop or acquire 20 to 40
multi-family residential communities, each comprised of approximately 150 to 400
units. Included in these developments are two to five affordable housing
developments of 150 to 250 units each that the Company may develop. Within the
next 12 months, Echelon plans to be under construction on approximately 2,400 to
3,800 units. Given current market conditions, Echelon is aggressively seeking
alliances to participate in joint venture partnerships, merchant build and
presale opportunities for some of these multi-family developments. These
strategic alliances have been, and will continue to be, an integral component of
the Company's strategic plan.
Echelon is capitalizing on the opportunity provided by its existing
inventory of property in the Tampa Bay area of Florida, as well as pursuing
other locations in the southeast and southwest United States, for development of
multi-family residential communities. To achieve geographic diversity, the
Company has established a pipeline of development sites in select markets in the
southeast and southwest United States. In establishing this pipeline, the
Company uses a proprietary market research software system that identifies
initial target markets which are then inspected by experienced Echelon
management. This software system also identifies specific market characteristics
which assist in designing the appropriate community for each target market and
each specific site. This systematic approach may reduce the market selection
cycle time and allow Echelon developers the opportunity to identify and reach a
target market ahead of competition and site price escalation. Currently, the
following multi-family residential communities are, or will be, under
development in 1998:
/bullet/ Construction of the clubhouse and the first 12 of 14 total
buildings, for ECHELON AT BAY ISLE KEY, a 369-unit multi-family
residential community in the Gateway area of Tampa Bay, was
completed through October 1998. Leasing is in process and to date,
over 240 units have been leased. Construction will be completed by
the end of the first quarter of 1999, with stabilization projected
six months following construction completion.
/bullet/ Construction has begun on the clubhouse and the 314 units of Phase
One of ECHELON AT THE RESERVE, a multi-family residential community
in CARILLON PARK. The clubhouse and the first building will be
completed in January 1999, with preleasing beginning in December
1998.
/bullet/ ECHELON AT WOODLAND PARK, located in Tulsa, Oklahoma, will be a
232-unit multi-family residential community. The land for the
development was purchased in July 1998 at a cost of $1.0 million,
and construction began in September 1998.
/bullet/ ECHELON AT NORTHLAKE, located in Atlanta, Georgia, will be a
256-unit multi-family residential community. The land for the
development was purchased in May 1998 at a cost of $4.0 million, and
construction began in November 1998.
/bullet/ ECHELON AT MEMORIAL CREEK, located in Tulsa, Oklahoma, will be a
292-unit multi-family residential community. The land for the
development was purchased in September 1998 at a cost of $1.6
million, and construction is planned to begin in the fourth quarter
of 1998.
/bullet/ ECHELON AT MISSION RANCH, located in Mesquite, Texas, will be a
295-unit multi-family residential community. The land for the
development was purchased in October 1998 at a cost of $1.1 million,
and construction is planned to begin in the fourth quarter of 1998.
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<PAGE>
As of November 1998, Echelon's development program has produced the current
pipeline of nine sites under contract, letter of intent or joint venture
negotiations, subject to the Company's final due diligence. The Company's
pipeline currently includes the following developments:
<TABLE>
<CAPTION>
DEVELOPMENT NAME ESTIMATED NUMBER OF UNITS LOCATION
---------------- ------------------------- --------
<S> <C> <C>
ECHELON AT BRIARGATE 395 Colorado Springs, Colorado
ECHELON AT TWENTY MILE VILLAGE 325 Parker, Colorado
ECHELON AT KELLER TOWN CENTER 276 Keller, Texas
ECHELON AT LAKESIDE 168 Plano, Texas
ECHELON AT CHANEY PLACE 296 Orlando, Florida
ECHELON AT UPTOWN 206 Orlando, Florida
ECHELON AT MID-TOWN 250 Memphis, Tennessee
ECHELON AT THE BALLPARK 381 Memphis, Tennessee
ECHELON AT WATTERS CREEK 200 Allen, Texas
------
Total 2,497
</TABLE>
The Company expects to maintain an active pipeline of ten to twenty sites
in target markets.
The Company continues to evaluate possible acquisitions, which include
other multi-family residential development companies and/or multi-family
residential assets. Some growth of the multi-family portfolio is expected to
result from strategic acquisition.
COMMERCIAL
During the next five years, the Company expects to hold its core office
buildings and subject to market conditions, expand its commercial real estate
portfolio by developing, or acquiring, up to 750,000 to 1,500,000 square feet of
commercial office space. A substantial amount of this space will be developed on
Echelon's existing land inventory in the Gateway area of Tampa Bay, Florida,
with the balance developed through land acquisition in other southeast and
southwest target markets in the United States.
The following commercial projects, all located in the Tampa Bay area, have
been completed during the year or are currently under development:
/bullet/ The construction and tenant improvements for BAYBORO STATION
(80,991 rentable square feet) were completed in the second quarter
of 1998. Florida Power Corporation has leased 100% of the building
under a 10-year lease which began in April 1998.
/bullet/ The construction and tenant improvements for CENTRAL STATION
(133,279 rentable square feet) were completed in the second quarter
1998. Florida Power Corporation has leased 100% of the building
under a 15-year lease which began in June 1998.
/bullet/ The construction of MCNULTY PARKING GARAGE, containing 714 parking
spaces and 9,000 square feet of ground floor retail space, continues
with an on-schedule completion date in December 1998. The Company
has executed a lease for 100% of the ground floor retail space.
MCNULTY PARKING GARAGE will provide parking for the tenants of
CENTRAL STATION, MCNULTY STATION and NATIONSBANK TOWER.
-20-
<PAGE>
/bullet/ The construction of CASTILLE AT CARILLON, 103,000 square foot Class
A office building in CARILLON PARK, is continuing with an
on-schedule completion date in March 1999. Echelon plans to occupy
approximately 20,000 square feet as its corporate headquarters. The
Company is currently in lease negotiations with third parties for
over 37,000 rentable square feet.
/bullet/ The design of 700 CARILLON is complete and ready to submit for
building permits. The construction of 700 CARILLON, a 147,100 square
foot office building, is planned to commence when anchor tenants are
secured.
/bullet/ The conceptual design plans are continuing for CARILLON TOWN CENTER,
an entertainment, retail, office, hotel and athletic club project,
designed to add amenities to CARILLON PARK. Construction will
commence when anchor tenants are secured. The ownership structure of
CARILLON TOWN CENTER may include ownership by Echelon, joint
ventures, or the sale of land for development to third parties. To
date, the Company has received the majority of the required
governmental approvals for the construction of CARILLON TOWN CENTER.
Although the Company plans to hold its core office buildings during this
planning period, short, medium and long-term exit strategies have been developed
for all currently owned commercial real estate. The Company intends to sell
non-core commercial and industrial properties as opportunities arise.
Echelon continues to evaluate the acquisition of other commercial real
estate development companies, real estate based operating companies and/or
commercial real estate assets, as opportunities become available. Some growth of
the commercial portfolio is expected to come from strategic acquisitions.
REAL ESTATE MANAGEMENT AND BROKERAGE SERVICES
The real estate management and brokerage services business segment is
complementary to the Company's multi-family residential and commercial real
estate operations. Growth is expected to occur primarily as a result of the
growth in the multi-family residential and commercial real estate operations,
and the growth of third-party revenue associated with leasing and property and
asset management. In addition, Echelon continues to evaluate the acquisition of
real estate management and/or brokerage companies, as opportunities become
available. Some growth in the real estate management and brokerage services may
come from strategic acquisitions.
INVESTMENTS IN FINANCIAL ASSETS
The Company generally plans to hold its leveraged lease portfolio until
maturity or until market values exceed termination values. At that time, the
Company will either sell or re-lease the assets, depending on which alternative
provides the greatest risk-adjusted return. The Company will continue to execute
a financial strategy that integrates the tax benefits provided by its
investments in affordable housing limited partnerships, with the deferred tax
liability of the leveraged lease portfolio in order to reduce its federal income
tax liability.
Operating leases and direct finance leases in aircraft and related
equipment will continue to be actively managed to maximize their value, which
may include the sale of the assets.
Significant transactions involving the Company's investment in financial
assets during the nine months ended September 30, 1998 include the following:
/bullet/ A joint venture in which Echelon had a 50% interest, sold two
aircraft engines which resulted in a pre-tax gain of $1.6 million to
the Company. As of July 31, 1998, the joint venture was dissolved,
resulting in the distribution of 50% of the net assets of the joint
venture to the Company. The $19.1 million of net assets received by
the Company are comprised of a direct finance lease for an aircraft
leased to Continental Airlines through February 2002.
-21-
<PAGE>
/bullet/ Echelon was paid in full on a deferred rent note receivable of $2.3
million from Continental Airlines. The note receivable was
originally scheduled to mature in 2000.
/bullet/ Echelon was paid in full on a real estate loan of $3.0 from Madison
Building, Inc. The real estate loan was originally scheduled to
mature in November 1998. As a result of the loan payoff, Echelon
reversed the $1.6 million allowance for losses on leases and loans
previously recorded.
/bullet/ Echelon sold two aircraft engines to United Technologies, Inc. The
sale of the aircraft engines and the termination of the related
leveraged lease resulted in after-tax income of $.4 million to the
Company.
/bullet/ Echelon executed an extension and rate adjustment on a direct
finance lease for an aircraft leased to Southwest Airlines. The
lease extension and rate adjustment was negotiated in order to
utilize the lease as collateral for a loan the Company executed in
November 1998.
As communicated previously, Echelon will continue to withdraw from the
aircraft and real estate lending business to focus on its core real estate
operations. The Company will collect the outstanding loan balances as soon as
practical, maximize the value of each asset, and redeploy the capital from the
loan portfolio to repay debt and/or invest in real estate operations. Echelon
expects to liquidate the loan portfolio by 2002.
Echelon expects to obtain sufficient capital from its operations, asset
sales, loan collections, project based and other financings, and the capital
markets sufficient to execute its strategic plan. However, no assurance can be
given that such capital will be available in sufficient amounts to execute this
plan.
-22-
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The Company considers certain statements contained herein regarding matters that
are not historical facts are forward-looking statements, including certain
statements contained in "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Because such statements involve risks and
uncertainties, actual strategies and the timing, and expected results thereof,
may differ materially from those expressed or implied by such forward-looking
statements.
Echelon wishes to caution readers that in addition to the important factors
described elsewhere in this Form 10-Q, the following important factors, among
others, could affect Echelon's actual results and could cause Echelon's actual
consolidated results during 1998, and beyond, to differ materially from those
expressed or implied in any forward-looking statements made by, or on behalf of
Echelon.
/bullet/ Echelon's anticipated increase in its level of real estate
development activities will require a significant amount of capital
and the ability to acquire land identified for future real estate
development. Accordingly, the extent of Echelon's real estate
development will depend upon the amount of funds generated through
operating activities, maturity and collection of loans, planned
asset sales, project-based and other financings and the capital
markets and the ability to acquire land identified for future real
estate development. There can be no assurance that operating
activities, maturity and collection of loans, planned asset sales
and project-based and other financings or the capital markets will
generate net proceeds for Echelon in amounts and at times necessary
to enable Echelon to carry out these development activities. There
can also be no assurance that Echelon will be able to acquire land
identified for future real estate development.
/bullet/ The successful implementation of Echelon's strategic and business
plans will depend in a large part on certain key officers, including
Mr. Darryl A. LeClair, Chairman, President and Chief Executive
Officer and Mr. W. Michael Doramus, Executive Vice President, who
have managed Echelon's businesses and participated in the
development of Echelon's business plan. Due to the unique experience
of these key officers and their knowledge of Echelon's assets, such
individuals could not be easily replaced, and the loss of such key
officers could have a material adverse effect on the Company.
Echelon has obtained key-man life insurance policies for both Mr.
LeClair and Mr. Doramus.
/bullet/ As a real estate development and management company, Echelon is and
will be subject to certain risks incident generally to the
ownership, development and management of real estate properties.
These risks include the cyclical nature of real estate markets,
governmental regulations and the need for governmental approvals,
general risk of acquisition, development, and construction, tenant
defaults, possible environmental liabilities, and competition from
other real estate owners and developers.
/bullet/ Currently, substantially all of Echelon's owned real estate
properties are located in the State of Florida, primarily in the
Tampa Bay area, including St. Petersburg and Tampa, and over 85% of
Echelon's commercial rental space (measured by rentable square
footage) is located in this area. Due to this current lack of
geographical diversification, Echelon is dependent upon the
continued demand for office, multi-family residential, industrial
and other commercial space in the Tampa Bay area. Echelon may be
adversely affected in the event the demand for office space in St.
Petersburg or Tampa declines or the St. Petersburg or Tampa economy
experiences a downturn. Like other real estate markets, the Florida
commercial real estate market has experienced periodic economic
fluctuations.
/bullet/ Aircraft leasing involves numerous risks, including risks stemming
from the obsolescence or physical deterioration of aircraft and the
possibility of defaults by lessees. In addition, fluctuations in
general business and economic conditions, the adoption of
restrictive regulations and legislation, changes in consumer demand
for air travel, fluctuations in fuel prices and other factors over
which lessors of aircraft have no control could be expected to
affect adversely the supply and demand for aircraft or aircraft
leases and may cause cost increases relating to the leasing of
aircraft that cannot be offset by increased leasing revenues. No
assurance can be given that a decline in the health of the airline
industry would not have an adverse effect on Echelon's business or
results of operations.
-23-
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company will be required to include additional disclosures regarding
certain quantitative and qualitative information about market risk exposures for
the year ending December 31, 1998.
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Subsequent to the quarter ended September 30, 1998, Echelon International
Corporation issued the following:
(1) News release dated October 8, 1998, announcing the Board of Directors'
authorization for the Company to purchase up to $15.0 million of the
Company's outstanding Common Stock. A copy of this news release is filed
as Exhibit 99.1.
(2) News release dated November 4, 1998, announcing 1998 third quarter
financial results. A copy of the news release is filed as Exhibit 99.2.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
NUMBER EXHIBIT
------ -------
10.1 Amended and Restated Employment Agreement for W. Michael Doramus
dated September 18, 1998
10.2 Amended and Restated Employment Agreement for Susan G. Johnson
dated September 18, 1998
10.3 Amended and Restated Employment Agreement for Darryl A. LeClair
dated September 18, 1998
10.4 Amended and Restated Employment Agreement for Julio A. Maggi dated
September 18, 1998
10.5 Amended and Restated Employment Agreement for Larry J. Newsome
dated September 18, 1998
27 Financial Data Schedule of Echelon International Corporation
99.1 Echelon International Corporation News Release dated October 8,
1998 announcing the Board of Directors' Authorization for the
Company to purchase up to $15.0 million of the Company's
outstanding Common Stock.
99.2 Echelon International Corporation News Release dated November 4,
1998 regarding 1998 third quarter financial results.
(b) Reports on Form 8-K:
None
-24-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LARRY J. NEWSOME Principal Financial Officer,
- ----------------------- Senior Vice President and Chief November 13, 1998
Larry J. Newsome Financial Officer
/s/ JAMES R. HOBBS, JR. Principal Accounting Officer,
- ----------------------- Vice President and Controller November 13, 1998
James R. Hobbs, Jr.
-25-
<PAGE>
EXHIBIT INDEX
EXHIDBIT DESCRIPTION
- -------- -----------
10.1 Amended and Restated Employment Agreement for W. Michael Doramus
dated September 18, 1998
10.2 Amended and Restated Employment Agreement for Susan G. Johnson
dated September 18, 1998
10.3 Amended and Restated Employment Agreement for Darryl A. LeClair
dated September 18, 1998
10.4 Amended and Restated Employment Agreement for Julio A. Maggi dated
September 18, 1998
10.5 Amended and Restated Employment Agreement for Larry J. Newsome
dated September 18, 1998
27 Financial Data Schedule of Echelon International Corporation
99.1 Echelon International Corporation News Release dated October 8,
1998 announcing the Board of Directors' Authorization for the
Company to purchase up to $15.0 million of the Company's
outstanding Common Stock.
99.2 Echelon International Corporation News Release dated November 4,
1998 regarding 1998 third quarter financial results.
EXHIBIT 10.1
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT was made and entered into on the 1st day of
October, 1997, but is effective for all purposes as of the date specified below
in Section 2, and is now amended and restated effective as of September 18,
1998, by and between ECHELON INTERNATIONAL CORPORATION, a Florida corporation
(the "Company"), and W. MICHAEL DORAMUS, residing at 3301 Southwestern Blvd.,
Dallas, Texas 75225 (the "Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Executive, and the Executive hereby accepts
such employment, upon the terms and subject to the conditions set forth in this
Agreement.
2. TERM
Subject to the provisions for termination as hereinafter provided, the
term of employment under this Agreement shall begin as of October 1, 1997, the
date of closing of the acquisition of all of the assets of Mission Development
Company by the Company (the "Acquisition"), and shall continue through December
31, 2000, provided, however, that this Employment Agreement shall automatically
be renewed for successive one year terms unless either party gives the other
written notice of termination at least ninety (90) days prior to the end of any
such term.
3. COMPENSATION
(a) BASE SALARY. The Company shall pay to the Executive as basic
compensation for all services rendered by the Executive during the term of this
Agreement a basic annualized salary of $225,000 per year, and, effective October
1, 1998, a basic annualized salary of $250,000 per year, or such other sum in
excess of that amount as the parties may agree on from time to time or as
provided in the next sentence (as in effect from time to time, the "Base
Salary"), payable monthly or in other more frequent installments, as determined
by the Company. The Board of Directors of the Company (the "Board of Directors")
shall have no authority to reduce the Executive's Base Salary in effect from
time to time. In addition, the Board of Directors, in its discretion, may award
a bonus or bonuses to the Executive in addition to the bonuses provided for in
Section 3(b).
(b) BONUSES. In addition to the Base Salary to be paid pursuant to Section
3(a), for the three months ending December 31, 1997 and for each of the
Company's two fiscal years ending
Employment Agreement -- 1
<PAGE>
December 31, 1998 and December 31, 1999 during the term of this Agreement,
provided the Executive continues to be employed by the Company under this
Agreement, the Executive shall be eligible to earn as incentive compensation the
annual bonuses specified, to the extent earned, on Exhibit A to this Agreement.
For each fiscal year ending after December 31, 1999, so long as the Employee
remains employed by the Company, the Executive shall be eligible to participate
in incentive compensation annual bonus plan(s) adopted by the Board of Directors
of the Company from time to time in accordance with the terms of such plans, any
such bonuses to be comparable to bonuses for other executive officers of the
Company with comparable duties and responsibilities to those of the Executive.
(c) CERTAIN PLANS AND INITIAL AWARD. (i) The Company has adopted certain
incentive compensation plans including a long term incentive plan (the "LTIP"),
providing for annual or other periodic awards to key employees of, among other
things, restricted stock and a stock option plan (the "ISO/NSO Plan"), providing
for the annual or other periodic issuance of options to purchase the Company's
common stock. The LTIP and ISO/NSO are referred to collectively in this
Agreement as the "Plans." The Executive will be given an opportunity to
participate in the Plans, in accordance with and subject to the terms of the
Plans as they may be adopted, amended and administered from time to time.
(ii) In addition to the incentive compensation referred to in
Section 3(c)(i), the Company hereby agrees to grant to the Executive under the
LTIP, effective upon the consummation of the Acquisition, options to purchase
one hundred twenty-five thousand (125,000) shares of the Company's common stock
(the "Initial Options"), which Initial Options shall be exercisable as to
one-fourth of the shares of common stock covered by the Initial Options one year
from the effective date of the grant as specified by the Company's Compensation
Committee, and as to an additional one-fourth of such shares each year
thereafter. All of such shares shall be registered on a Form S-8 registration
statement. The exercise price for 88,414 of the Initial Options (including the
options for 62,500 shares to become exercisable within the first two years
following the date of grant) shall be $20.00 and the exercise price for the
remaining 36,586 of the Initial Options shall be the closing price on the New
York Stock Exchange (or such other market on which the Company's stock trades if
it is not listed on the New York Stock Exchange) on the trading day which is the
effective date of the grants of the Initial Options as specified by the
Company's Compensation Committee (the "Option Pricing Date"), which shall be the
date of the Acquisition, or if the Option Pricing Date is not a trading day, the
first trading day thereafter.
(iii) The Initial Options shall be fully vested and shall be
exercisable as to all of the shares of common stock covered by the Initial
Options upon (a) the death of the Executive or termination of employment upon
the "Permanent Disability" (as that term is defined in Section 7(b)(ii) of this
Agreement) of the Executive, (b) the termination of employment of the Executive
by the Company "Without Good Cause" (as that term is defined in Section
8(b)(iii) of this Agreement) (c) the occurrence of a "Change in Control" (as
that term is defined in Section 8(d)(i) of this Agreement), or (d) the exercise
by the Executive of his rights to terminate his employment under Section 8(e)
following a "CEO Termination Event" (as that term is defined in Section 8(e) of
this Agreement).
Employment Agreement -- 2
<PAGE>
(d) REIMBURSEMENT. The Company shall reimburse the Executive, in
accordance with the Company's policies and practices for senior management, for
all reasonable expenses incurred by the Executive in the performance of the
Executive's duties under this Agreement, provided, however, that the Executive
must furnish to the Company an itemized account, reasonably satisfactory to the
Company, in substantiation of such expenditures.
(e) CERTAIN BENEFITS. The Executive shall be entitled to such fringe
benefits including, but not limited to, medical and other insurance benefits as
may be provided from time to time by the Company to other senior officers of the
Company. In addition, without restricting the foregoing, the Company shall
provide the Executive at the Company's sole cost and expense with (i) a policy
or policies of term life insurance (the "Basic Life Insurance") providing, among
other things, basic death benefits of not less than two times the Base Salary in
effect from time to time, (ii) directors and officers liability insurance with
coverage, terms and limits suitable for an executive vice president of a New
York Stock Exchange listed company comparable in financial size and wherewithal
to that of the Company and (iii) a monthly allowance of $500 cash to reimburse
the Executive for the use and maintenance of his automobile in furtherance of
the business and affairs of the Company, provided that the Executive shall at
all times insure the Executive and the Company in such amounts as may be
reasonably requested by the Company against claims for bodily injury, death and
property damages occurring as a result of its use. The Company shall use its
reasonable best efforts to make available to the Executive in connection with
providing and paying for the Basic Life Insurance the opportunity to purchase at
the Executive's sole cost and expense additional life insurance with a basic
death benefit (the "Optional Life Insurance") equal to two times the Executive's
Base Salary in effect from time to time (affording the Executive the opportunity
to have basic death benefit life insurance coverage equal to four times such
Base Salary). The Company shall use its reasonable best efforts to effect the
transfer of the ownership to the Executive of the policy or policies for the
Basic Life Insurance and the Optional Life Insurance, if any, upon the
termination of the Executive's employment by the Company. After the Executive's
termination, payment of any premiums would be the obligation of the Executive.
(f) OTHER INCENTIVE AND BENEFIT PLANS. The Executive shall be eligible to
participate, in accordance with the terms of such plans as they may be adopted,
amended and administered from time to time, in incentive, bonus, benefit or
similar plans, including without limitation, any stock option, bonus or other
equity ownership plan, any short, mid or long term incentive plan and any other
bonus, pension or profit sharing plans established by the Company from time to
time.
(g) RIGHT TO USE CERTAIN PROPRIETARY INFORMATION. Reference is made to
that certain Consulting Agreement between the Company and Mission Development
Company ("MDC"), a Texas corporation, which was effective as of July 30, 1996,
was subsequently amended and has been terminated October 1, 1997 (the "MDC
Consulting Agreement"). Upon the termination of the Executive's employment with
the Company for any reason other than for "Good Cause," and provided the
Executive is not then in breach or violation of any other agreement with or
other obligation to the Company, then, effective upon such termination, the
Company shall license to the Executive the non-exclusive, non- transferrable
royalty-free right to use the System and the Manual as such terms were defined
in the MDC Consulting Agreement. Such license shall be pursuant to a license
agreement in substantially the same form as is attached hereto as Exhibit B
Employment Agreement -- 3
<PAGE>
(the "System and Manual License Agreement"). The Executive shall have no rights
to the System and the Manual upon the termination of his employment by the
Company for "Good Cause."
4. DUTIES
(a) GENERAL. The Executive is engaged as the Executive Vice President of
the Company. In addition, at the request of the Board of Directors, the
Executive shall serve in any position or positions in any wholly owned
subsidiary or affiliate of the Company, without any additional compensation. The
Executive shall have such duties and hold such other offices as may from time to
time be reasonably assigned to him by the Board of Directors of the Company.
(b) INDEMNIFICATION. To the fullest extent permitted by law, the Company
shall indemnify and hold harmless the Executive for all liabilities, costs,
expenses and damages arising out of or in connection with the Executive's
service to the Company under this Agreement. In furtherance of this indemnity,
the Company shall enter into an indemnification agreement, in form and substance
reasonably satisfactory to the Executive and the Company. In addition, the
indemnity provided hereunder shall extend to service by the Executive as an
officer or director, or service in a similar capacity, for any civic, community
or charitable organization, provided such service is undertaken at the request
of or with the knowledge and acquiescence of the Company. The foregoing
indemnification shall be in addition to any rights or benefits the Executive may
have under statute, the Bylaws or Articles of Incorporation of the Company,
under a policy of insurance, or otherwise.
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF
(a) EXTENT OF SERVICES. During the term of the Executive's employment
under this Agreement, except during customary vacation periods and periods of
illness, the Executive shall devote full-time energy and attention during
regular business hours to the benefit and business of the Company as may be
reasonably necessary in performing the Executive's duties pursuant to this
Agreement.
(b) VACATIONS. The Executive shall be entitled to vacations with pay and
to such personal and sick leave with pay in accordance with the policy of the
Company as may be established from time to time by the Company and applied to
other senior officers of the Company. In no event shall the Executive be
entitled to fewer than four weeks' annual vacation. Unused vacation days may be
carried over from one year to the next for a period of up to two years. Any
vacation days which remain unused on the second anniversary of the end of the
fiscal year to which they originally related shall expire and shall thereafter
no longer be useable by the Executive.
6. FACILITIES
Employment Agreement -- 4
<PAGE>
The Company shall provide the Executive with a fully furnished office, and
the facilities of the Company shall be generally available to the Executive in
the performance of the Executive's duties pursuant to this Agreement, it being
understood and contemplated by the parties that all equipment, supplies and
office personnel required in the performance of the Executive's duties under
this Agreement shall be supplied by and at the sole expense of the Company.
7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
(a) DEATH. If the Executive dies during the term of the Executive's
employment, the Company shall pay to the estate of the Executive within 30 days
after the date of death such Base Salary and any cash bonus compensation earned
pursuant to the provisions of any incentive compensation plan then in effect but
not yet paid, as would otherwise have been payable to the Executive up to the
end of the month in which the Executive's death occurs. After receiving the
payments provided in this Section 7(a) the Executive and the Executive's estate
shall have no further rights under this Agreement (other than those rights
already accrued).
(b) DISABILITY. (i) During any period of disability, illness or incapacity
during the term of this Agreement which renders the Executive at least
temporarily unable to perform the services required under this Agreement, the
Executive shall receive the Base Salary payable under Section 3(a) of this
Agreement plus any cash bonus compensation earned pursuant to the provisions of
any incentive compensation plan then in effect but not yet paid, less any cash
benefits received by him under any disability insurance carried by or provided
by the Company. Upon the Executive's "Permanent Disability" (as defined below),
which permanent disability continues during the payment periods specified
herein, the Company shall pay to the Executive for the period of time specified
below an amount (the "Disability Payment") equal to the (i) sum of (A) the Base
Salary, paid in the same monthly or other periodic installments as in effect at
the time of the Executive's Permanent Disability plus (B) an equal monthly pro
rata portion of an amount of cash equal to the target level of the annual cash
bonus payable to the Executive under the Company's Management Incentive
Compensation Plan as described on Exhibit A or any similar bonus or incentive
plans or programs then in effect (the "MICP Target Amount"), which MICP Target
Amount shall be paid in pro rata equal monthly installments over the period of
time specified below (ii) reduced by the amount of any monthly payments under
any policy of disability income insurance paid for by the Company which payments
are received during the time when any Disability Payment is being made to the
Executive following the Executive's Permanent Disability. For so long as the
Executive's Permanent Disability continues, the Disability Payment shall be paid
by the Company to the Executive at the same time or times as would have been the
case for payment of Base Salary over the unexpired term of this Agreement if the
Executive had not become permanently disabled and had remained employed by the
Company hereunder, but in no case shall such period exceed 24 months. The
Executive may be entitled to receive payments under any disability income
insurance which may be carried by or provided by the Company from time to time.
Upon "Permanent Disability" (as that term is defined in Section 7(b)(ii) below)
of the Executive, except as provided in this Section 7(b), all rights of the
Executive under this Agreement (other than rights already accrued) shall
terminate.
Employment Agreement -- 5
<PAGE>
(ii) The term "Permanent Disability" as used in this Agreement shall
mean, in the event a disability insurance policy is maintained by the Company
covering the Executive at such time and is in full force and effect, the
definition of permanent disability set forth in such policy. In the event no
disability insurance policy is maintained with respect to the executive at such
time and in full force and effect, "Permanent Disability" shall mean the
inability of the Executive, as determined by the Board of Directors of the
Company, by reason of physical or mental disability to perform the duties
required of him under this Agreement for a period of one hundred and eighty
(180) days in any one-year period. Successive periods of disability, illness or
incapacity will be considered separate periods unless the later period of
disability, illness or incapacity is due to the same or related cause and
commences less than six months from the ending of the previous period of
disability. Upon such determination, the Board of Directors may terminate the
Executive's employment under this Agreement upon ten (10) days' prior written
notice. If any determination of the Board of Directors with respect to permanent
disability is disputed by the Executive, the parties hereto agree to abide by
the decision of a panel of three physicians. The Executive and Company shall
each appoint one member, and the third member of the panel shall be appointed by
the other two members. The Executive agrees to make himself available for and
submit to examinations by such physicians as may be directed by the Company.
Failure to submit to any such examination shall constitute a breach of a
material part of this Agreement.
8. OTHER TERMINATIONS
(a) BY THE EXECUTIVE. (i) The Executive may terminate the Executive's
employment hereunder upon giving at least ninety (90) days' prior written
notice. In addition, the Executive shall have the right to terminate the
Executive's employment hereunder on the conditions and at the times provided for
in Section 8(d) of this Agreement and such termination shall be deemed pursuant
to Section 8(d) hereof.
(ii) If the Executive gives notice pursuant to Section 8(a)(i)
above, the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing.
In any such event, the Executive shall be entitled to receive only the Base
Salary not yet paid, as would otherwise have been payable to the Executive up to
the end of the month specified as the month of termination in the termination
notice. In the event the Executive gives notice pursuant to Section 8(a)(i)
above but specifies a termination date in excess of ninety (90) days from the
date of such notice, the Company shall have the right (but not the obligation)
to accelerate the termination date to any date prior to the date specified in
the notice that is in excess of ninety (90) days from the date of the notice,
and the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing;
provided, however, that in any such event the Executive shall be entitled to
receive the Base Salary, as would otherwise have been payable to the Executive
up to the end of the month of the termination date properly selected by the
Company. Upon receiving the payments provided for
Employment Agreement -- 6
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under this Section 8(a), all rights of the Executive under this Agreement (other
than rights already accrued) shall terminate.
(b) TERMINATION FOR "GOOD CAUSE". (i) Except as otherwise provided in this
Agreement, the Company may terminate the employment of the Executive hereunder
only for "good cause," which shall mean (a) the willful, substantial, continued
and unjustified refusal of the Executive substantially to perform his duties
with the Company to the extent of his ability to do so (other than any failure
due to physical or mental incapacity) or (b) willful misconduct materially and
demonstrably injurious to the Company, financially or otherwise, in each case,
as determined in the reasonable discretion of the Board of Directors, but with
respect to each of the foregoing bases for termination specified in the
preceding clause, only if (1) the Executive has been provided with written
notice of any assertion that there is a basis for termination for good cause
which notice shall specify in reasonable detail specific facts regarding any
such assertion and the Executive has been given a reasonable period of time
within which to remedy or cure the problem or complaint, (2) such notice is
provided to the Executive a reasonable time before the Board of Directors meets
to consider any possible termination for cause, (3) at or prior to the meeting
of the Board of Directors to consider the matters described in the written
notice, an opportunity is provided to the Executive and his counsel to be heard
by the Board of Directors with respect to the matters described in the written
notice, before it acts with respect to such matter, (4) any resolution or other
action by the Board of Directors with respect to any deliberation regarding or
decision to terminate the Executive for good cause is duly adopted by a vote of
a majority of the entire Board of Directors of the Company at a meeting of the
Board duly called and held and (5) the Executive is promptly provided with a
copy of the resolution or other corporate action taken with respect to such
termination. No act or failure to act by the Executive shall be considered
willful unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interests of the
Company.
(ii) If the employment of the Executive is terminated for good cause
under Section 8(b)(i) of this Agreement, the Company shall pay to the Executive
any Base Salary earned prior to the effective date of termination but not yet
paid and any cash bonus compensation earned pursuant to the provisions of any
incentive compensation plan then in effect but not paid to the Executive prior
to the effective date of such termination. Under such circumstances, such
payments shall be in full and complete discharge of any and all liabilities or
obligations of the Company to the Executive hereunder, and the Executive shall
be entitled to no further benefits under this Agreement (other than rights
already accrued).
(iii) Termination of the employment of the Executive other than as
expressly specified above in this Section 8(b) for good cause shall be deemed to
be a termination of employment "Without Good Cause."
(c) TERMINATION WITHOUT GOOD CAUSE. (i) Notwithstanding any other
provision of this Agreement, the Company shall have the right to terminate the
Executive's employment Without Good Cause pursuant to the provisions of this
Section 8(c). If the Company shall terminate the employment of the Executive
Without Good Cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified by the Company being referred to herein as the "Accelerated
Termination Date"), the Executive,
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until the end of the term of this Agreement then in effect as provided for in
Section 2 or until the date which is 12 months after the Accelerated Termination
Date, whichever is greater, shall continue to receive (1) the Base Salary, paid
in the same monthly or other periodic installments as in effect prior to the
Accelerated Termination Date; (2) an equal monthly pro rata portion of an amount
of cash equal to the MICP Target Amount (as that term is defined in Section
7(b)(i)) in respect of the year during which the Executive's employment
terminates, or, if greater, the MICP Target Amount multiplied times the number
of years (or fractions thereof) remaining in the then unexpired term of this
Agreement plus; (3) an equal monthly pro rata portion of an amount of cash equal
to the cash value of any bonus paid or to be paid to the Executive in the form
of performance shares or restricted stock under the LTIP as described on Exhibit
A or any similar bonus or incentive plans or programs then in effect (valued, if
applicable under the terms of such plans or programs, at the greater of the
closing price on the New York Stock Exchange, or other such market on which the
Company's stock trades if it is not listed on the New York Stock Exchange, on
the first trading day of the plan or program cycle or the Accelerated
Termination Date, or if the Accelerated Termination Date is not a trading day,
on the first trading day thereafter) in respect of the then-current three year
cycles of such plans or programs or such other cycle as is then in effect,
calculated as if the then-current cycles were completed and the target levels
attained (the "LTIP Target Amount"), which cash payment shall be in lieu and in
full satisfaction of any rights under the LTIP in respect of such stock or
shares as described in Exhibit A or any similar bonus or incentive plans or
programs in effect at the time of such payment (all of which stock or shares
shall be cancelled upon such payment and receipt); and (4) any other cash or
other bonus compensation earned prior to the date of such termination pursuant
to the terms of all incentive compensation plans then in effect other than the
Company's Management Incentive Compensation Plan as described on Exhibit A or
any similar bonus on incentive plans or programs then in effect; provided that,
notwithstanding such termination of employment, the Executive's covenants set
forth in Section 10 and Section 11 are intended to and shall remain in full
force and effect; and provided further that, upon determination that such
termination shall occur, the Company shall have the right (but not the
obligation), pending such termination, to relieve the Executive, in whole or in
part, of the Executive's duties under this Agreement, or direct the Executive to
no longer perform such duties, or direct that the Executive no longer be
required to report to work, or any combination of the foregoing.
(ii) The parties agree that, because there can be no exact measure
of the damage that would occur to the Executive as a result of a termination by
the Company of the Executive's employment Without Good Cause, the payments and
benefits paid and provided pursuant to this Section 8(c) shall be deemed to
constitute liquidated damages and not a penalty for the Company's termination of
the Executive's employment Without Good Cause.
(d) CHANGE IN CONTROL. (i) For purposes of this Agreement, a "Change in
Control" shall mean the first to occur of:
(1) a change in control of the Company of a nature that is
required, pursuant to the Securities Exchange Act of 1934 (the
"1934 Act"), to be reported in response to Item 1(a) of a
Current Report on Form 8-K or Item 6(e) of Schedule 14A under
the 1934 Act (in each case under this Agreement, references to
provisions of the 1934 Act and the rules and regulations
Employment Agreement -- 8
<PAGE>
promulgated thereunder being understood to refer to such law,
rules and regulations as the same are in effect on November 1,
1996); or
(2) the acquisition of "Beneficial Ownership" (as defined in Rule
13d-3 under the 1934 Act) of the Company's securities
comprising 35% or more of the combined voting power of the
Company's outstanding securities by any "person" (as that term
is used in Sections 13(d) and 14(d)(2) of the 1934 Act and the
rules and regulations promulgated thereunder, but not
including any trustee or fiduciary acting in that capacity for
an employee benefit plan sponsored by the Company) and such
person's "affiliates" and "associates" (as those terms are
defined under the 1934 Act), but excluding any ownership by
the Executive and his affiliates and associates; or
(3) the failure of the "Incumbent Directors" (as defined below) to
constitute at least a majority of all directors of the Company
(for these purposes, "Incumbent Directors" means individuals
who were the directors of the Company on November 1, 1996,
and, after his or her election, any individual becoming a
director subsequent to November 1, 1996, whose election, or
nomination for election by the Company's stockholders, is
approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Directors, except that no
individual shall be considered an Incumbent Director who is
not recommended by management and whose initial assumption of
office as a director is in connection with an actual or
threatened "election contest" relating to the "election of
directors" of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the 1934 Act); or
(4) the closing of a sale of all or substantially all of the
assets of the Company;
(5) the Company's adoption of a plan of dissolution or
liquidation; or
(6) the closing of a merger or consolidation involving the Company
in which the Company is not the surviving corporation or if,
immediately following such merger or consolidation, less than
seventy-five percent (75%) of the surviving corporation's
outstanding voting stock is held or is anticipated to be held
by persons who are stockholders of the Company immediately
prior to such merger or consolidation.
(ii) If a Change in Control occurs, the Executive shall have the
right, exercisable for a period of one year thereafter, to immediately terminate
this Agreement by delivering a written statement to that effect to the Company
(irrespective of any termination or purported termination of this Agreement or
the Executive's employment hereunder by the Company on or at any time following
such Change in Control) and upon such a termination the Executive shall have the
right to receive and the Company shall be obligated to pay or provide to or on
behalf of the Executive: (A) as soon as reasonably practicable, but in no event
following thirty (30) days,
Employment Agreement -- 9
<PAGE>
after the Executive delivers such statement to the Company, in cash a lump sum
payment in an amount equal to the sum of (1) the "Control Cash Payment" as that
term is defined in Section 8(d)(iii) of this Agreement; (2) three times the
annual Base Salary then in effect (or in effect immediately prior to the Change
in Control, if greater); (3) three times the maximum level of the annual cash
bonus payable to the Executive under the Company's Management Incentive
Compensation Plan as described on Exhibit A (or any similar bonus or incentive
plans or programs then in effect), applicable to the year in which employment
terminates or the immediately preceding year, if greater; (4) the cash value of
the LTIP Target Amount (as that term is defined in Section 8(c)), which cash
payment shall be in lieu and in full satisfaction of any rights under the LTIP
in respect of such stock or shares as described in Exhibit A or any similar
bonus or incentive plans or programs in effect at the time of such payment (all
of which stock or shares shall be cancelled upon such payment and receipt),
other than any outstanding options to purchase the Company's common stock held
by the Executive (which shall not be so cancelled); and (5) the additional
payments necessary to discharge certain tax liabilities (the "Gross Up") as that
term is defined in Section 13 of this Agreement; and (B) for a twenty-four (24)
month period after the date on which the Executive delivers such statement to
the Company, the benefits described in Section 3(e) of this Agreement that were
provided to the Executive (and his spouse and dependents, if applicable)
immediately prior to the Change in Control (on terms, conditions and benefit
levels no less favorable than those in effect immediately prior to the Change in
Control), including, without limitation, medical and other health benefits,
Basic Life Insurance and Optional Life Insurance, contributions or benefits
under all applicable tax-qualified or non-qualified profit-sharing, savings,
pension, retirement or deferred compensation plans, and all benefits and amounts
forfeited by the Executive on account of termination of the Executive's
employment under any employee benefit plans or programs of the Company or its
affiliates, but excluding disability benefits and directors and officers
liability insurance coverage, at the Company's sole cost and expense; provided
that the Company may, in its discretion, pay the Executive a cash lump-sum equal
to the economic equivalent of any such benefits (for example, the total gross
premiums due for any insurance coverage for the applicable period) on an
after-tax basis, as determined by the Company in good faith and reasonably
acceptable to the Executive, in lieu of providing such benefits in kind (the sum
of the foregoing amounts and benefits described in clauses (A) and (B) above,
other than the Gross Up, being referred to as the "Change in Control Payment").
If the Executive fails to exercise his rights under this Section 8(d)(ii) within
one year following a Change in Control, such rights shall expire and be of no
further force or effect.
(iii) The "Control Cash Payment" shall be (A) $600,000, if the first
event to occur that constitutes a Change in Control occurs after December 31,
1997, but on or before December 31, 1998; (B) $900,000, if the first event to
occur that constitutes a Change in Control occurs after December 31, 1998, but
on or before December 31, 1999; or (C) $1,200,000, if the first event to occur
that constitutes a Change in Control occurs at any time after December 31, 1999.
(e) TERMINATION OF EMPLOYMENT OF CHIEF EXECUTIVE OFFICER. Upon the
termination of Darryl A. LeClair's employment with the Company (the "CEO
Termination Date"), for any reason other than the death of Darryl A. LeClair,
the Executive, for a period of six (6) months from the CEO Termination Date, may
terminate the Executive's employment hereunder upon
Employment Agreement -- 10
<PAGE>
giving at least thirty (30) days' prior written notice; provided however, the
Executive shall not be entitled to terminate this agreement in accordance with
this section if the Executive, either as an individual, partner, officer,
director, stockholder, employee, advisor, independent contractor, joint
venturer, consultant, agent, or representative or salesman for any person, firm,
partnership, corporation or other entity, is to be employed by or consult with
Darryl A. LeClair or any entity employing Darryl A. LeClair after the CEO
Termination Date (the "Prohibited Activity"). In the event of the death of
Darryl A. LeClair, provided this Agreement remains in effect for a period of one
year from the date of Darryl A. LeClair's death (the "Trigger Event"), the
Executive, for a period of six (6) months after the Trigger Event, may terminate
the Executive's employment hereunder upon giving at least thirty (30) days'
prior written notice. Upon termination of the Executive's employment pursuant to
this section, the Executive shall be entitled to receive, until the end of the
term of this Agreement then in effect as provided for in Section 2 or until the
date which is 12 months after the CEO Termination Date, whichever is later, (1)
the Base Salary, paid in the same monthly or other periodic installments as in
effect prior to the CEO Termination Date; (2) an equal monthly pro rata portion
of an amount of cash equal to the MICP Target Amount (as that term is defined in
Section 7(b)(i)) in respect of the year during which the Executive's employment
terminates, or, if greater, the MICP Target Amount multiplied times the number
of years (or fractions thereof) remaining in the then unexpired term of this
Agreement plus; (3) the cash value of the LTIP Target Amount (as that term is
defined in Section 8(c)), which cash payment shall be in lieu and in full
satisfaction of any rights under the LTIP in respect of such stock or shares as
described in Exhibit A or any similar bonus or incentive plans or programs in
effect at the time of such payment (all of which stock or shares shall be
cancelled upon such payment and receipt); and (4) any other cash or other bonus
compensation earned prior to the date of such termination pursuant to the terms
of all incentive compensation plans then in effect other than the Company's
Management Incentive Compensation Plan as described on Exhibit A or any similar
bonus on incentive plans or programs then in effect; provided that,
notwithstanding such termination of employment, the Executive's covenants set
forth in Section 10 and Section 11 are intended to and shall remain in full
force and effect and provided further that in the event of such termination, the
Company shall have the right (but not the obligation) to relieve the Executive,
in whole or in part, of the Executive's duties under this Agreement, or direct
the Executive to no longer perform such duties, or direct that the Executive no
longer be required to report to work, or any combination of the foregoing.
Notwithstanding the foregoing, the payments provided for under this section
shall immediately cease if the Executive engages in any Prohibited Activity
after the CEO Termination Date. After receiving the payments provided in this
Section the Executive shall have no further rights under this Agreement (other
than those rights already accrued).
(f) INTENTIONS REGARDING CERTAIN STOCK AND BENEFIT PLANS. Except as
otherwise provided herein, upon any termination of the Executive's employment
Without Good Cause or upon the exercise by the Executive of his rights to
terminate his employment in accordance with Section 8(e) or the occurrence of a
Change in Control, it is the intention of the parties that any and all vesting
or performance requirements or conditions affecting any outstanding restricted
stock, performance stock, stock option, stock appreciation right, bonus, award,
right, grant or any other incentive compensation under any of the Plans, under
this Agreement, or otherwise received, shall be deemed to be fully satisfied and
any risk of forfeiture with respect thereto shall be deemed to have lapsed.
Employment Agreement -- 11
<PAGE>
(g) CERTAIN RIGHTS MUTUALLY EXCLUSIVE. The provisions of Section 8(c) and
Section 8(d) are mutually exclusive, provided, however, that if within one year
following commencement of an 8(c) payout there shall be a Change in Control as
defined in Section 8(d)(i), then the Executive shall be entitled to the amounts
and benefits payable to the Executive under Section 8(d)(ii) and 8(d)(iii). The
triggering of the payment and benefit requirements of Section 8(d) shall cause
the provisions of Section 8(c) to become inoperative.
9. DISCLOSURE
The Executive agrees that during the term of the Executive's employment by
the Company, the Executive will disclose and disclose only to the Company all
ideas, methods, plans, developments or improvements known by him which relate
directly or indirectly to the business of the Company, whether acquired by the
Executive before or during the Executive's employment by the Company. Nothing in
this Section 9 shall be construed as requiring any such communication where the
idea, plan, method or development is lawfully protected from disclosure as a
trade secret of a third party or by any other lawful prohibition against such
communication. The covenants of this Section 9 shall not be violated by ordinary
and customary communications with reporters, bankers and securities analysts and
other members of the investment community.
10. CONFIDENTIALITY
The Executive agrees to keep in strict secrecy and confidence any and all
information the Executive assimilates or to which the Executive has access
during the Executive's employment by the Company and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Company. The Executive agrees that both during and after the term of the
Executive's employment by the Company, the Executive will not, without the prior
written consent of the Company, disclose any such confidential information to
any third person, partnership, joint venture, company, corporation or other
organization. The foregoing covenants shall not be breached to the extent that
any such confidential information becomes a matter of general knowledge other
than through a breach by the Executive of the Executive's obligations under this
Section 10 or to the extent the disclosure is required by applicable law.
Employment Agreement -- 12
<PAGE>
11. NONCOMPETITION AND NONSOLICITATION
(a) GENERAL. The Executive hereby acknowledges that, during and solely as
a result of the Executive's employment by the Company, the Executive has
received and shall continue to receive: (1) special training and education with
respect to the operations of the Company's real estate development and
management businesses and its leasing, lending and financing activities, and
other related matters, and (2) access to confidential information and business
and professional contacts. In consideration of the special and unique
opportunities afforded to the Executive by the Company as a result of the
Executive's employment, as outlined in the previous sentence, the Executive
hereby agrees to the restrictive covenants in this Section 11.
(b) NONCOMPETITION. During the term of the Executive's employment, whether
pursuant to this Agreement, any automatic or other renewal hereof or otherwise,
and, except as may be otherwise herein provided, for a period of one (1) year
after the termination of the Executive's employment with the Company, regardless
of the reason for such termination, the Executive shall not, directly or
indirectly, enter into, engage in, be employed by or consult with any business
which competes with the Company's real estate lending, leasing, development or
management businesses in Florida; provided, however, that, the foregoing to the
contrary notwithstanding, the restrictions of this Section 11(b) shall not apply
following termination of the Executive's employment under paragraph (c) or (d)
of Section 8 of this Agreement in connection with a Change in Control. The
Executive shall not engage in such prohibited activities, either as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, or representative or
salesman for any person, firm, partnership, corporation or other entity so
competing with the Company. The restrictions of this Section 11 shall not be
violated by (i) the ownership of no more than 2% of the outstanding securities
of any company whose stock is traded on a national securities exchange or is
quoted in the Automated Quotation System of the National Association of
Securities Dealers (NASDAQ), or (ii) other outside business investments that do
not in any manner conflict with the services to be rendered by the Executive for
the Company and that do not diminish or detract from the Executive's ability to
render the Executive's required attention to the business of the Company.
(c) NONSOLICITATION. During the Executive's employment with the Company
and, except as may be otherwise herein provided, for a period of one (1) year
following the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive agrees the
Executive will refrain from and will not, directly or indirectly, as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, representative,
salesman or otherwise solicit any of the employees of the Company to terminate
their employment; provided however, that except upon the termination of the
Executive's employment with the Company for "Good Cause," the provisions of this
section shall not apply to the Executive with respect to the solicitation of J.
Patrick Rahmey, K. Brent Little, Kerry Adams and Elizabeth Harvey or any persons
employed by the Company to replace such individuals; provided further, however,
that, the foregoing to the contrary notwithstanding, the restrictions of this
Section 11(c) shall not apply following termination of the Executive's
employment under paragraph (c) or (d) of Section 8 of this Agreement in
connection with a Change in Control.
Employment Agreement -- 13
<PAGE>
(d) TERM EXTENDED OR SUSPENDED. The period of time during which the
Executive is prohibited from engaging in certain business practices pursuant to
Sections 11(b) or (c) shall be extended by any length of time during which the
Executive is in breach of such covenants.
(e) ESSENTIAL ELEMENT. It is understood by and between the parties hereto
that the foregoing restrictive covenants set forth in Sections 11(a) through (c)
are essential elements of this Agreement, and that, but for the agreement of the
Executive to comply with such covenants, the Company would not have agreed to
enter into this Agreement. Such covenants by the Executive shall be construed as
agreements independent of any other provision in this Agreement. The existence
of any claim or cause of action of the Executive against the Company, whether
predicated on this Agreement, or otherwise, shall not constitute a defense to
the enforcement by the Company of such covenants.
(f) SEVERABILITY. It is agreed by the Company and Executive that if any
portion of the covenants set forth in this Section 11 are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographical area.
The Company and Executive agree that, if any court of competent jurisdiction
determines the specified time period or the specified geographical area
applicable to this Section 11 to be invalid, unreasonable, arbitrary or against
public policy, a lesser time period or geographical area which is determined to
be reasonable, non-arbitrary and not against public policy may be enforced
against the Executive. The Company and the Executive agree that the foregoing
covenants are appropriate and reasonable when considered in light of the nature
and extent of the business conducted by the Company.
(g) LIMITATION ON BREACH BY COMPANY OF MATERIAL PROVISION. Notwithstanding
anything to the contrary, if at any time during the term of this Agreement the
Company is in material breach of its obligations under this Agreement, such
breach remains uncured for a period of fifteen (15) business days after written
notice thereof by the Executive to the Company, the Executive is not in material
breach his obligations under this Agreement and the Executive elects on account
of such breach by the Company to terminate his Employment by the Company, then
Sections 11(b) and 11(c) of this Agreement shall not apply to the Executive upon
or after such termination.
12. SPECIFIC PERFORMANCE
The Executive agrees that damages at law will be an insufficient remedy to
the Company if the Executive violates the terms of Sections 9, 10 or 11 of this
Agreement and that the Company would suffer irreparable damage as a result of
such violation. Accordingly, it is agreed that the Company shall be entitled,
upon application to a court of competent jurisdiction, to obtain injunctive
relief to enforce the provisions of such Sections, which injunctive relief shall
be in addition to any other rights or remedies available to the Company. The
Executive agrees to pay to the Company all reasonable costs and expenses
incurred by the Company relating to the enforcement of the terms of Sections 9,
10 or 11 of this Agreement, including reasonable fees and reasonable
disbursements of counsel selected by the Company (during investigation and
before and at trial and in appellate proceedings).
Employment Agreement -- 14
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13. PAYMENT OF EXCISE TAXES
(a) PAYMENT OF EXCISE TAXES. If the Executive is to receive any (1) Change
in Control Payment under Section 8(d), (2) any benefit or payment under Section
7 as a result of or following the death or Permanent Disability of the
Executive, (3) any benefit or payment under Section 8(c) as a result of or
following any termination of employment hereunder Without Good Cause, (4) any
benefit or payment under Section 8(e), or (5) any benefit or payment under the
Plans as a result of a Change in Control, following the death or Permanent
Disability of the Executive or following the termination of employment hereunder
Without Good Cause (such sections being referred to as the "Covered Sections"
and the benefits and payments to be received thereunder being referred to as the
"Covered Payments"), the Executive shall be entitled to receive the amount
described below to the extent applicable. If any Covered Payment(s) under any of
the Covered Sections or any other payments, awards, benefits or distributions
(or any acceleration or vesting of any such payment, award, benefit or
distribution) received or to be received by or on behalf of the Executive in
connection with a Change in Control or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other plan, program,
arrangement or agreement with the Company or any other person which effectuates
a Change in Control, or any affiliate of the Company or such other person)
(collectively, the "Payments") are subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986 (as amended from time to time, the
"Code"), or any successor or similar provision of the Code (the "Excise Tax"),
the Company shall pay the Executive an additional amount (the "Gross Up") such
that the net amount retained by the Executive after deduction of any Excise Tax
on the Payments and any federal, state and local income or employment tax,
social security tax, excise tax, or any interest or penalties imposed on any
amounts paid under this Section 13 shall, be equal to the Payments.
(b) CERTAIN ADJUSTMENT PAYMENTS. For purposes of determining the Gross Up,
the Executive shall be deemed to pay the federal income tax at the highest
marginal rate of taxation (currently 39.6%) in the calendar year in which the
payment to which the Gross Up applies is to be made and state and local income
taxes (if any) at the highest marginal rate of taxation in the state and
locality of Executive's residence on the last day of such calendar year. The
determination of whether such Excise Tax is payable and the amount thereof shall
be made upon the opinion of tax counsel selected by the Company and reasonably
acceptable to the Executive ("Tax Counsel"), applying the rules set forth in the
next sentence. For purposes of determining whether any of the Covered Payments
will be subject to the Excise Tax and the amount of the Excise Tax: (1) all
Payments shall be treated as "parachute payments," within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments," within the meaning
of Section 280G(b)(1) of the Code, shall be treated as subject to the Excise
Tax, unless in the opinion of Tax Counsel such Payments (other than Covered
Payments), in whole or in part, do not constitute such parachute payments, or
such excess parachute payments, in whole or in part, represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount," within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;
and (2) the value of any non-cash or deferred payments or benefits shall be
determined by a "big five" (or equivalent)
Employment Agreement -- 15
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international accounting firm selected by the Company and reasonably acceptable
to the Executive in accordance with the principles of Section 280G(d)(3) and (4)
of the Code. The Gross Up, if any, that is due under this Section 13 shall be
paid to the Executive in cash in a lump sum within thirty (30) days after the
date on which the amount thereof has been determined or is reasonably
determinable by Tax Counsel, and, in any event, not later than thirty (30) days
following termination of the Executive's employment under this Agreement,
provided that if the amount of the Gross Up cannot be finally determined at or
before such time, the amount paid shall be the estimated full amount of the
Gross Up as reasonably determined by Tax Counsel in good faith in accordance
with the principles described in this Section 13. The Executive shall be
entitled to retain his own advisor to verify, and consult with Tax Counsel in
connection with, any determination or computation related to the Excise Tax
and/or Gross Up. If Tax Counsel's opinion is not finally accepted by the
Internal Revenue Service upon audit or otherwise, or such an estimated Gross Up
is paid, then appropriate adjustments shall be computed (with additional Gross
Up, if applicable) by such Tax Counsel based upon the final amount of the Excise
Tax so determined; any additional amount due the Executive as a result of such
adjustment shall be paid to the Executive by the Company in cash in a lump sum
within thirty (30) days of such computation (including any interest or penalties
owed by the Executive to the Federal government by reason of any such
underpayment), or any amount due the Company as a result of such adjustment
shall be paid to the Company by the Executive in cash in a lump sum within
thirty (30) days of such computation. All fees, costs and expenses of Tax
Counsel and any accounting firm or other advisor retained in accordance with
this Section 13 shall be borne solely by the Company.
14 MISCELLANEOUS
(a) WAIVER OF BREACH. The waiver by either party to this Agreement of a
breach of any of the provisions of this Agreement by the other party shall not
be construed as a waiver of any subsequent breach by such other party.
(b) NO RIGHT TO CONTINUED EMPLOYMENT. Notwithstanding the fact that
certain provisions of this Agreement and Exhibit A reference a three year cycle
or provide for benefits upon a third year of employment, this Agreement shall
have a two year term with annual one year renewal terms subject to the
termination provisions contained herein.
(c) COMPLIANCE WITH OTHER AGREEMENTS. The Executive represents and
warrants that the execution of this Agreement by him and the Executive's
performance of the Executive's obligations hereunder will not conflict with,
result in the breach of any provision of or the termination of or constitute a
default under any Agreement to which the Executive is a party or by which the
Executive is or may be bound.
(d) BINDING EFFECT; ASSIGNMENT. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company. This Agreement is a personal employment
contract and the rights, obligations and interests of the Executive hereunder
may not be sold, assigned, transferred, pledged or hypothecated.
Employment Agreement -- 16
<PAGE>
(e) ENTIRE AGREEMENT. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof; provided, however, that nothing contained
in this Agreement shall be deemed to limit, reduce, waive or adversely affect
the benefits, payments and rights of participation to which the Executive and
his dependents and beneficiaries are entitled under the generally applicable
terms and conditions of any plan, policy, program or arrangement in which the
Executive or any such dependent or beneficiary participates during, and
following termination for any reason of, the Executive's employment under this
Agreement, or otherwise pursuant to applicable law. This Agreement may be
changed only by an agreement in writing signed by the party against whom any
waiver, change, amendment, modification or discharge is sought.
(f) HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
(g) NO DUTY TO MITIGATE. The Executive shall be under no duty to mitigate
any loss of income as result of the termination of his employment hereunder and
any payments due the Executive upon termination of employment shall not be
reduced in respect of any other employment compensation received by the
Executive following such termination.
(h) FLORIDA LAW. This Agreement shall be construed pursuant to and
governed by the substantive laws of the State of Florida (except that any
provision of Florida law shall not apply if the law of a state or jurisdiction
other than Florida would otherwise apply).
(i) VENUE; PROCESS. The parties to this Agreement agree that jurisdiction
and venue in any action brought pursuant to this Agreement to enforce its terms
or otherwise with respect to the relationships between the parties shall
properly lie in and only in the Circuit Court of the Sixth Judicial Circuit of
the State of Florida in and for Pinellas County (the "Circuit Court") and the
parties agree that jurisdiction shall not properly lie in any other jurisdiction
provided, however, if jurisdiction does not properly lie with the Circuit Court,
the parties agree that jurisdiction and venue shall properly lie in and only in
the United States District Court for the Middle District of Florida, Tampa
Division. The parties hereby waive any objections which they may now or
hereafter have based on venue and/or forum non conveniens and irrevocably submit
to the jurisdiction of any such court in any legal suit, action or proceeding
arising out of or relating to this Agreement. The parties further agree that the
mailing by certified or registered mail, return receipt requested, of any
process required by any such court shall constitute valid and lawful service of
process against them, without the necessity for service by any other means
provided by statute or rule of court.
(j) SEVERABILITY. Any provision of this Agreement which is determined by a
court of competent jurisdiction to be prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, unenforceability or non-authorization without
invalidating the remaining provisions hereof or affecting the validity,
enforceability or legality of such provision in any other jurisdiction. In any
such case, such determination shall not affect any other provision of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect. If any provision or term of this
Employment Agreement -- 17
<PAGE>
Agreement is susceptible to two or more constructions or interpretations, one or
more of which would render the provision or term void or unenforceable, the
parties agree that a construction or interpretation which renders the term or
provision valid shall be favored.
(k) DEDUCTION FOR TAX PURPOSES. The Company's obligations to make payments
under this Agreement are independent of whether any or all of such payments are
deductible expenses of the Company for federal income tax purposes.
(l) ENFORCEMENT. If, within 10 days after demand to comply with the
obligations of one of the parties to this Agreement served in writing on the
other, compliance or reasonable assurance of compliance is not forthcoming, and
the party demanding compliance engages the services of an attorney to enforce
rights under this Agreement, the prevailing party in any action shall be
entitled to recover all reasonable costs and expenses of enforcement (including
reasonable attorneys' fees and reasonable expenses during investigation, before
and at trial and in appellate proceedings). In addition, each of the parties
agrees to indemnify the other in respect of any and all claims, losses, costs,
liabilities and expenses, including reasonable fees and reasonable disbursements
of counsel (during investigation prior to initiation of litigation and at trial
and in appellate proceedings if litigation ensues), directly or indirectly
resulting from or arising out of a breach by the other party of their respective
obligations hereunder. The parties' costs of enforcing this Agreement shall
include prejudgment interest. Additionally, if any party incurs any
out-of-pocket expenses in connection with the enforcement of this Agreement, all
such amounts shall accrue interest at 18% per annum (or such lower rate as may
be required to avoid any limit imposed by applicable law) commencing 30 days
after any such expenses are incurred.
(m) NOTICES. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and three days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice shall be sent to:
To the Company: Echelon International Corporation
One Progress Plaza, Suite 1500
St. Petersburg, FL 33701
Attn: Chairman of the Board
Telecopy: (727) 803-8201
To the Executive at the Executive's address herein first above written, or
to such other address as either party may specify by written notice to the other
in accordance with this section 14(m).
Employment Agreement -- 18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ATTEST: ECHELON INTERNATIONAL CORPORATION
(Corporate Seal)
________________________________ By:____________________________________
Secretary Darryl A. LeClair, President
Date:____________________
Witnesses: EXECUTIVE
________________________________ _______________________________________
As to Executive W. MICHAEL DORAMUS
Date:____________________
Employment Agreement -- 19
<PAGE>
EXHIBIT A
TO
EMPLOYMENT AGREEMENT BETWEEN W. MICHAEL DORAMUS AND
ECHELON INTERNATIONAL CORPORATION,
AMENDED AND RESTATED AS OF SEPTEMBER 18, 1998
The Company has established a Management Incentive Compensation Plan
("MICP") and Long Term Incentive Plan ("LTIP") for its senior management in
which the Executive will participate. During the three months ending on December
31, 1997, the MICP will provide for an annual cash bonus based upon the
Company's net income for such year. During the fiscal years ending on December
31, 1998, and December 31, 1999, respectively, and thereafter, as approved by
the Board of Directors or the Compensation Committee thereof, while the
Executive continues to be employed by the Company under this Agreement (the
"Covered Years"), the MICP will provide for annual cash bonuses 60% of which
will be payable upon satisfaction of specific threshold, target and maximum
goals to be determined each year by the Board of Directors or the Compensation
Committee, which specific goals shall be set forth in writing and attached as a
schedule hereto no later than January 31 of each year (the "Performance Goals"),
and 40% will be payable based upon the Company's net income for each of the
Covered Years. The LTIP will provide the opportunity to earn restricted shares
and options 60% of which will be earned upon the cumulative satisfaction of the
Performance Goals for each of the Covered Years and 40% of which will be earned
based upon the Company's cumulative results of operation for three year cycles,
beginning with the three year cycle of Covered Years ending December 31, 1999
(the "Cycle Years"), provided in each case that the Executive continues to be
employed by the Company under this Agreement. The Executive's participation in
the MICP and the LTIP during the Covered Years and the Cycle Years shall be
based upon the criteria set forth below and set forth on the schedules to be
attached hereto and shall include awards with the values indicated in the tables
set forth below and as more fully described in this Exhibit A.
MICP
During each of the Covered Years, (i) all MICP bonuses shall be paid in
cash; (ii) if Threshold Net Income is not achieved, no MICP cash bonus will be
paid; (iii) if actual net income exceeds Threshold Net Income, but is less than
Target Net Income, or exceeds Target Net Income but is less than Maximum Net
Income, the percentage of the MICP bonus shall be proportionately increased
above the Threshold bonus amount or the Target Bonus amount, as the case may be,
and (iv) if actual net income equals or exceeds Maximum Net Income, the Maximum
MICP cash bonus will be paid, but no additional cash bonus will be payable under
the MICP regardless of the amount by which actual net income in that Covered
Year exceeds Maximum Net Income. The following table sets forth information
regarding the MICP Net Income Threshold, Target and Maximum and the total cash
bonuses to be paid upon satisfaction of both the MICP Performance Goals and Net
Income Goals. Of the total cash bonuses set forth below, 60% of the applicable
cash bonus amount (Threshold, Target or Maximum) shall be paid, if any, upon
satisfaction of the applicable Performance Goals (Threshold, Target or Maximum)
as set forth on the schedule to be attached hereto and 40% of the applicable
cash bonus amount (Threshold, Target or Maximum) shall be paid, if any, upon
satisfaction of the applicable Net Income level (Threshold, Target or Maximum).
Employment Agreement -- 20
<PAGE>
- ------------------------------------------------------------------
MICP 1997 1998 1999
- ------------------------------------------------------------------
THRESHOLD
- ------------------------------------------------------------------
Net Income $1,584,274.00 $1,768,816.00 $2,132,640.00
- ------------------------------------------------------------------
MICP Cash Bonus $11,250.00 $46,250.00 $50,000.00
(% of Base Salary) (5%) (20%) (20%)
- ------------------------------------------------------------------
TARGET
- ------------------------------------------------------------------
Net Income $2,112,366 $2,358,422.00 $2,843,521.00
- ------------------------------------------------------------------
MICP Cash Bonus $22,500.00 $92,500.00 $100,000.00
(% of Base Salary) (10%) (40%) (40%)
- ------------------------------------------------------------------
MAXIMUM
- ------------------------------------------------------------------
Net Income $2,640,457 $2,948,027.00 $3,554,401.00
- ------------------------------------------------------------------
MICP Cash Bonus $45,000.00 $138,750.00 $150,000.00
(% of Base Salary) (20%) (60%) (60)%
- ------------------------------------------------------------------
LTIP
1997, 1998, 1999 CYCLE YEARS
The sum of each year's Threshold Net Income for the three 1997, 1998 and
1999 Cycle Years shall be referred to as the "Threshold LTIP Net Income"; the
sum of each year's Target Net Income for the three such Cycle Years shall be
referred to as "Target LTIP Net Income"; and the sum of each year's Maximum Net
Income forth the three such Cycle Years shall be referred to as "Maximum LTIP
Net Income," in each case, as set forth in the following tables.
- -------------------------------------------------------------------------------
LTIP 1997 1998 1999 LTIP NET INCOME
- -------------------------------------------------------------------------------
THRESHOLD THRESHOLD
- -------------------------------------------------------------------------------
Net Income $1,584,274.00 $1,768,816.00 $2,132,640.00 $5,485,730.00
- -------------------------------------------------------------------------------
TARGET TARGET
- -------------------------------------------------------------------------------
Net Income $2,112,366.00 $2,358,422.00 $2,843,521.00 $7,314,309.00
- -------------------------------------------------------------------------------
MAXIMUM MAXIMUM
- -------------------------------------------------------------------------------
Net Income $2,640,457.00 $2,948,027.00 $3,554,401.00 $9,142,885.00
- -------------------------------------------------------------------------------
The following table sets forth information regarding the Threshold, Target
and Maximum LTIP Net Income and the total restricted stock values and number of
options associated with satisfying the Performance Goals and achieving such
levels of cumulative net income. Of the total restricted stock values and number
of options set forth below, 60% of the applicable restricted stock values and
number of options (Threshold, Target or Maximum) shall be paid, if
Employment Agreement -- 21
<PAGE>
any, upon satisfaction of the applicable Performance Goals (Threshold, Target or
Maximum) as set forth on the schedule to be attached hereto and 40% of the total
applicable restricted stock values and number of options (Threshold, Target or
Maximum) shall be paid, if any, upon satisfaction of the applicable cumulative
Net Income level (Threshold, Target or Maximum) set forth below:
Employment Agreement -- 22
<PAGE>
- -----------------------------------------------------------
LTIP THREE YEARS ENDING DECEMBER 31,
1999
- -----------------------------------------------------------
OPTIONS TO
DOLLAR VALUE OF PURCHASE NUMBER
RESTRICTED STOCK OF SHARES OF
COMMON STOCK
- -----------------------------------------------------------
THRESHOLD
- -----------------------------------------------------------
Cumulative Net Income $5,485,730.00
- -----------------------------------------------------------
LTIP Value $101,250.00 11,250
(% of Base Salary) (20%)
- -----------------------------------------------------------
TARGET
- -----------------------------------------------------------
Cumulative Net Income $7,314,309.00
- -----------------------------------------------------------
LTIP Value $202,500.00 22,500
(% of Base Salary) (40%)
- -----------------------------------------------------------
MAXIMUM
- -----------------------------------------------------------
Cumulative Net Income $9,142,885.00
- -----------------------------------------------------------
LTIP Value $303,750.00 33,750
(% of Base Salary) (60%)
- -----------------------------------------------------------
For purposes of administering the LTIP, during the 1997, 1998, 1999
three-year cycle, (i) all LTIP awards shall be paid in the form of restricted
shares and options as indicated above; (ii) the number of restricted shares
shall be determined by dividing the dollar value of the Maximum LTIP Value,
$303,750, by the closing price on January 1, 1998, or the first trading day
thereafter, on the New York Stock Exchange (or such other market on which the
Company's stock trades if it is not listed on the New York Stock Exchange);
(iii) the restricted shares, among other things, shall be subject to a risk of
forfeiture if and to the extent that the performance criteria set forth in this
Exhibit A with respect to the 1997, 1998, 1999 Cycle Years are not met; (iv) if
actual cumulative net income for the three-year period ending December 31, 1999,
does not equal or exceed Threshold LTIP Net Income for such period, all
restricted shares shall be forfeited, and no LTIP bonus will have been earned;
(v) if actual cumulative net income for the three year period ending December
31, 1999, exceeds Threshold LTIP Net Income, but is less than Target LTIP Net
Income, for such period, or exceeds Target LTIP Net Income, but is less than
Maximum LTIP Net Income, for such period, the percentage of the LTIP restricted
shares as to which the risk of forfeiture shall lapse shall be proportionately
increased above the Threshold bonus amount or the Target bonus amount, as the
case may be; (vi) if cumulative net income for the three-year period ending
December 31, 1999 equals or exceeds Maximum LTIP Net Income for such period, the
risk of forfeiture shall lapse as to all restricted shares, but no additional
restricted shares will be issuable under the LTIP regardless of the amount by
which actual cumulative net income for the three years ending December 31, 1999
exceeds such Maximum LTIP Net Income (vii) the option exercise price shall be
the closing price on December 31 1999, or the first trading
Employment Agreement -- 23
<PAGE>
day thereafter, on the New York Stock Exchange (or such other market on which
the Company's stock trades if it is not listed on the New York Stock Exchange);
and (vii) the options shall be 100% vested as of the date of the satisfaction of
the applicable performance goal.
1998, 1999, 2000 LTIP CYCLE YEARS
The sum of each year's Threshold Net Income for the three 1998, 1999 and
2000 Cycle Years shall be referred to as the "Threshold LTIP Net Income"; the
sum of each year's Target Net Income for the three such Cycle Years shall be
referred to as "Target LTIP Net Income"; and the sum of each year's Maximum Net
Income for the three such Cycle Years shall be referred to as "Maximum LTIP Net
Income," in each case, as set forth in the following tables.
- ------------------------------------------------------------------------------
LTIP 1998 1999 2000 LTIP NET INCOME
- ------------------------------------------------------------------------------
THRESHOLD THRESHOLD
- ------------------------------------------------------------------------------
Net Income $1,768,816.00 $2,132,640.00 $4,848,000.00 $8,749,456.00
- ------------------------------------------------------------------------------
TARGET TARGET
- ------------------------------------------------------------------------------
Net Income $2,358,422.00 $2,843,521.00 $6,464,000.00 $11,665,943.00
- ------------------------------------------------------------------------------
MAXIMUM MAXIMUM
- ------------------------------------------------------------------------------
Net Income $2,948,027.00 $3,554,401.00 $8,080,000.00 $14,582,428.00
- ------------------------------------------------------------------------------
The following table sets forth the incremental annual award correlating to
the Threshold, Target and Maximum LTIP Net Income and the total restricted stock
values and number of options associated with satisfying the Performance Goals
and achieving such levels of cumulative net income. Of the total restricted
stock values and number of options set forth below, 60% of the applicable
restricted stock values and number of options (Threshold, Target or Maximum)
shall be paid, if any, upon satisfaction of the applicable Performance Goals
(Threshold, Target or Maximum) as set forth on the schedule to be attached
hereto and 40% of the total applicable restricted stock values and number of
options (Threshold, Target or Maximum) shall be paid, if any, upon satisfaction
of the applicable cumulative Net Income level (Threshold, Target or Maximum) set
forth below:
Employment Agreement -- 24
<PAGE>
- -----------------------------------------------------------
LTIP THREE YEARS ENDING DECEMBER 31,
2000
- -----------------------------------------------------------
OPTIONS TO
DOLLAR VALUE OF PURCHASE NUMBER
RESTRICTED STOCK OF SHARES OF
COMMON STOCK
- -----------------------------------------------------------
THRESHOLD
- -----------------------------------------------------------
Cumulative Net Income $8,749,456.00
- -----------------------------------------------------------
LTIP Value $50,000.00 5,000
(% of Base Salary) (20%)
- -----------------------------------------------------------
TARGET
- -----------------------------------------------------------
Cumulative Net Income $11,665,943.00
- -----------------------------------------------------------
LTIP Value $100,000.00 10,000
(% of Base Salary) (40%)
- -----------------------------------------------------------
MAXIMUM
- -----------------------------------------------------------
Cumulative Net Income $14,582,428.00
- -----------------------------------------------------------
LTIP Value $150,000.00 15,000
(% of Base Salary) (60%)
- -----------------------------------------------------------
For purposes of administering the LTIP, during the 1998, 1999, 2000 three-year
cycle, (i) all LTIP awards shall be paid in the form of restricted shares and
options as indicated above; (ii) the number of restricted shares shall be
determined by dividing the dollar value of the Maximum LTIP Value, $150,000, by
the closing price on February 4, 1998, or the first trading day thereafter, on
the New York Stock Exchange (or such other market on which the Company's stock
trades if it is not listed on the New York Stock Exchange); (iii) the restricted
shares, among other things, shall be subject to a risk of forfeiture if and to
the extent that the performance criteria set forth in this Exhibit A with
respect to the 1998, 1999, 2000 Cycle Years are not met; (iv) if actual
cumulative net income for the three-year period ending December 31, 2000 does
not equal or exceed Threshold LTIP Net Income for such period, all restricted
shares shall be forfeited, and no LTIP bonus will have been earned; (v) if
actual cumulative net income for the three year period ending December 31, 2000,
exceeds Threshold LTIP Net Income, but is less than Target LTIP Net Income, for
such period, or exceeds Target LTIP Net Income, but is less than Maximum LTIP
Net Income, for such period, the percentage of the LTIP restricted shares as to
which the risk of forfeiture shall lapse shall be proportionately increased
above the Threshold bonus amount or the Target bonus amount, as the case may be;
(vi) if cumulative net income for the three-year period ending December 31, 2000
equals or exceeds Maximum LTIP Net Income for such period, the risk of
forfeiture shall lapse as to all restricted shares, but no additional restricted
shares will be issuable under the LTIP regardless of the amount by which actual
cumulative net income for the three years ending December 31, 2000 exceeds such
Maximum LTIP Net Income (vii) the option exercise price shall be the closing
price on December 31 2000,
Employment Agreement -- 25
<PAGE>
or the first trading day thereafter, on the New York Stock Exchange (or such
other market on which the Company's stock trades if it is not listed on the New
York Stock Exchange); and (vii) the options shall be 100% vested as of the date
of the satisfaction of the applicable performance goal.
Employment Agreement -- 26
EXHIBIT 10.2
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT was made and entered into on the 19th day of
December, 1996, effective for all purposes as of November 22, 1996, and is now
amended and restated effective as of September 18, 1998, by and between ECHELON
INTERNATIONAL CORPORATION, a Florida corporation (the "Company"), and SUSAN G.
JOHNSON, residing at 2799 Feather Sound Drive, Clearwater, Florida 34622 (the
"Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM
Subject to the provisions for termination as hereinafter provided, the
term of part-time employment under this Agreement shall begin as of November 22,
1996 and shall continue through June 1, 1997 (the "Part-Time Employment Term")
and the term of full-time employment shall begin as of June 2, 1997 (the
"Full-Time Employment Date") and shall continue through December 31, 1998,
provided, however, that this Employment Agreement shall automatically be renewed
for successive one year terms of full-time employment unless either party gives
the other written notice of termination at least ninety (90) days prior to the
end of any such term.
3. COMPENSATION
(a) PART-TIME COMPENSATION. The Company shall pay to the Executive as
basic compensation for all services rendered by the Executive during the
Part-Time Employment Term of this Agreement a basic salary of $2,400 per month.
Other than as provided in this Section, during the Part-Time Employment Term of
this Agreement the Executive shall be entitled to no further benefits under this
Agreement.
(b) FULL-TIME BASE SALARY. Effective as of the Full-Time Employment
Date, the Company shall pay to the Executive as basic compensation for all
services rendered by the Executive during the term of this Agreement a basic
annualized salary of $125,000 per year, and, effective June 1, 1998, a basic
annualized salary of $155,000 per year, or such other sum in excess of that
amount as the parties may agree on from time to time or as provided in the next
sentence (as in effect from time to time, the "Base Salary"), payable monthly or
in other more frequent installments, as determined by the Company. The Board of
Directors of the Company (the "Board of Directors") shall have no authority to
reduce the Executive's Base Salary in effect
1
<PAGE>
from time to time. In addition, the Board of Directors, in its discretion, may
award a bonus or bonuses to the Executive in addition to the bonuses provided
for in Section 3(b).
(c) BONUSES. In addition to the Base Salary to be paid pursuant to
Section 3(a), for the seven months beginning as of the Full-Time Employment Date
and ending December 31, 1997 and for the Company's fiscal year ending December
31, 1998 during the term of this Agreement, the Company shall pay as incentive
compensation the bonuses, to the extent earned, specified on Exhibit A to this
Agreement. For each fiscal year ending after December 31, 1998, provided the
Executive continues to be employed by the Company under this Agreement, the
Executive shall be eligible for incentive compensation annual bonus plan(s)
adopted by the Board of Directors of the Company from time to time in accordance
with the terms of such plans.
(d) CERTAIN PLANS AND INITIAL AWARD. (i) It is anticipated that the
Company will adopt certain incentive compensation plans including a long term
incentive plan (the "LTIP"), providing for annual or other periodic awards to
key employees, among other things, of restricted stock and a stock option plan
(the "ISO/NSO Plan"), providing for the annual or other periodic issuance of
options to purchase the Company's common stock. The LTIP and ISO/NSO are
referred to collectively in this Agreement as the "Plans." Effective as of the
Full-Time Employment Date, the Executive will be given an opportunity to
participate in the Plans, in accordance with and subject to the terms of the
Plans as they may be adopted, amended and administered from time to time.
(ii) In addition to the incentive compensation referred to in
Section 3(c)(i), the Company hereby agrees to issue to the Executive under the
LTIP, effective upon the Full-Time Employment Date, that number of shares of the
Company's common stock (the "Initial Restricted Stock") as will equal two tenths
of one percent (0.20%) of the shares of the Company's common stock distributed
in the Distribution (as that term is defined in the Company's Registration
Statement on Form 10, as amended), which Initial Restricted Stock shall be
subject to risk of forfeiture, which risk will lapse as to one-fifth of the
shares of the Initial Restricted Stock on January 31, 1998, and as to an
additional one-fifth of the Initial Restricted Stock on each of January 31,
1999, January 31, 2000, January 31, 2001 and January 31, 2002.
(iii) In addition to the incentive compensation referred to in
Section 3(c)(i) and the Initial Restricted Stock, the Company hereby agrees to
grant to the Executive under the LTIP, effective as of the Full-Time Employment
Date, options to purchase one thousand (1,000) shares of the Company's common
stock (the "Initial Options"), which Initial Options shall be exercisable as to
one-fifth of the shares of common stock covered by the Initial Options on June
2, 1998, and as to an additional one-fifth of such shares on each of June 2,
1999, June 2, 2000, June 2, 2001 and June 2, 2002. The exercise price for the
Initial Options shall be the closing price on the New York Stock Exchange (or
such other market on which the Company's stock trades if it is not listed on the
New York Stock Exchange) on the trading day which is the eighth month
anniversary of the day of the completion of the Distribution (the "Option
Pricing Date") or if the Option Pricing Date is not a trading day, the first
trading day thereafter.
(iv) Any and all risks of forfeiture shall lapse as to all of
the Initial Restricted Stock and the Initial Options shall be fully vested and
shall be exercisable as to all of the shares of common stock covered by the
Initial Options upon (i) the death of the Executive or termination of employment
upon the "Permanent Disability" (as that term is defined in Section
2
<PAGE>
7(b)(ii) of this Agreement) of the Executive, (ii) the termination of employment
of the Executive by the Company "Without Good Cause" (as that term is defined in
Section 8(b)(iv) of this Agreement) or (iii) the occurrence of a "Change in
Control" (as that term is defined in Section 8(d)(i) of this Agreement).
(e) REIMBURSEMENT. The Company shall reimburse the Executive, in
accordance with the Company's policies and practices for senior management, for
all reasonable expenses incurred by the Executive in the performance of the
Executive's duties under this Agreement, provided, however, that the Executive
must furnish to the Company an itemized account, satisfactory to the Company, in
substantiation of such expenditures.
(f) CERTAIN BENEFITS. Effective as of the effective date of this
Agreement, the Executive shall be entitled to such medical and other health
benefits as may be provided from to time to time to other senior officers of the
Company. Effective as of the Full-Time Employment Date the Executive shall be
entitled, in addition to medical and other health benefits, to such fringe
benefits including, but not limited to, life insurance benefits and other
benefits as may be provided from time to time by the Company to other senior
officers of the Company. In addition, without restricting the foregoing,
effective as of the Full-Time Employment Date the Company shall provide the
Executive at the Company's sole cost and expense with (i) a policy or policies
of term life insurance (the "Basic Life Insurance") providing, among other
things, basic death benefits of not less than two times the Base Salary in
effect from time to time, (ii) directors and officers liability insurance with
coverage, terms and limits suitable for a vice president of a New York Stock
Exchange listed company comparable in financial size and wherewithal to that of
the Company and (iii) a monthly allowance of $500 cash to reimburse the
Executive for the use and maintenance of her automobile in furtherance of the
business and affairs of the Company, provided that the Executive shall at all
times insure the Executive and the Company in such amounts as may be reasonably
requested by the Company against claims for bodily injury, death and property
damages occurring as a result of its use. The Company shall use its reasonable
best efforts to make available to the Executive in connection with providing and
paying for the Basic Life Insurance the opportunity to purchase at the
Executive's sole cost and expense additional life insurance with a basic death
benefit (the "Optional Life Insurance") equal to two times the Executive's Base
Salary in effect from time to time (affording the Executive the opportunity to
have basic death benefit life insurance coverage equal to four times such Base
Salary). The Company shall use its reasonable best efforts to effect the
transfer of the ownership to the Executive of the policy or policies for the
Basic Life Insurance and the Optional Life Insurance, if any, upon the
termination of the Executive's employment by the Company. After the Executive's
termination, payment of any premiums would be the obligation of the Executive.
(g) OTHER INCENTIVE AND BENEFIT PLANS. Effective as of the Full-Time
Employment Date the Executive shall be eligible to participate, in accordance
with the terms of such plans as they may be adopted, amended and administered
from time to time, in incentive, bonus, benefit or similar plans, including
without limitation, any stock option, bonus or other equity ownership plan, any
short, mid or long term incentive plan and any other bonus, pension or profit
sharing plans established by the Company from time to time.
4. DUTIES
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(a) GENERAL. The Executive is engaged as a Vice President of the
Company, and, effective June 1, 1998, as Senior Vice President of the Company,
and, effective December 3, 1998, as Senior Vice President and General Counsel
and Corporate Secretary of the Company. In addition, at the request of the Board
of Directors, the Executive shall serve in any position or positions in any
wholly owned subsidiary or affiliate of the Company, without any additional
compensation. The Executive shall have such duties and hold such other offices
as may from time to time be reasonably assigned to her by the Board of Directors
of the Company.
(b) INDEMNIFICATION. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless the Executive for all liabilities,
costs, expenses and damages arising out of or in connection with the Executive's
service to the Company under this Agreement. In furtherance of this indemnity,
the Company shall enter into an indemnification agreement, in form and substance
reasonably satisfactory to the Executive and the Company. In addition, the
indemnity provided hereunder shall extend to service by the Executive as an
officer or director, or service in a similar capacity, for any civic, community
or charitable organization, provided such service is undertaken at the request
of or with the knowledge and acquiescence of the Company. The foregoing
indemnification shall be in addition to any rights or benefits the Executive may
have under statute, the Bylaws or Articles of Incorporation of the Company,
under a policy of insurance, or otherwise.
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF
(a) EXTENT OF SERVICES. Effective as of the Full-Time Employment Date,
except during customary vacation periods and periods of illness, the Executive
shall devote full-time energy and attention during regular business hours to the
benefit and business of the Company as may be reasonably necessary in performing
the Executive's duties pursuant to this Agreement. Notwithstanding the
foregoing, during the Part-Time Employment Term of this Agreement, the Executive
shall be required to devote only ten (10) hours a week to the benefit and
business of the Company in performing the Executive's duties pursuant to this
Agreement.
(b) VACATIONS. Effective as of the Full-Time Employment Date the
Executive shall be entitled to vacations with pay and to such personal and sick
leave with pay in accordance with the policy of the Company as may be
established from time to time by the Company and applied to other senior
officers of the Company. However, in no event shall the Executive be entitled to
less than one week vacation with pay after the first six months of full-time
employment, two weeks vacation with pay per year after the first 12 months of
full-time employment, three weeks vacation with pay during calendar year 1998,
and four weeks vacation with pay per year in each calendar year beginning after
1998. Unused vacation days may be carried over from one year to the next for a
period of up to two years. Any vacation days which remain unused on the second
anniversary of the end of the fiscal year to which they originally related shall
expire and shall thereafter no longer be useable by the Executive.
6. FACILITIES
The Company shall provide the Executive with a fully furnished office,
and the facilities of the Company shall be generally available to the Executive
in the performance of the
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Executive's duties pursuant to this Agreement, it being understood and
contemplated by the parties that all equipment, supplies and office personnel
required in the performance of the Executive's duties under this Agreement shall
be supplied by and at the sole expense of the Company.
7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
(a) DEATH. If after the Full-Time Employment Date the Executive dies
during the term of the Executive's employment, the Company shall pay to the
estate of the Executive within 30 days after the date of death such Base Salary
and any cash bonus compensation earned pursuant to the provisions of any
incentive compensation plan then in effect but not yet paid, as would otherwise
have been payable to the Executive up to the end of the month in which the
Executive's death occurs. After receiving the payments provided in this Section
7(a) the Executive and the Executive's estate shall have no further rights under
this Agreement (other than those rights already accrued).
(b) DISABILITY. (i) During any period of disability, illness or
incapacity after the Full-Time Employment Date and during the term of this
Agreement which renders the Executive temporarily unable to perform the services
required under this Agreement, the Executive shall receive the Base Salary
payable under Section 3(a) of this Agreement plus any cash bonus compensation
earned pursuant to the provisions of any incentive compensation plan then in
effect but not yet paid, less any cash benefits received by her under any
disability insurance carried by or provided by the Company. Upon the Executive's
"Permanent Disability" (as defined below),the Executive shall receive the Base
Salary payable under Section 3(a) of this Agreement plus any cash bonus
compensation earned pursuant to the provisions of any incentive compensation
plan then in effect but not yet paid, as would otherwise have been payable to
the Executive up to the end of the month in which the Executive's Permanent
Disability occurs. Upon "Permanent Disability" (as that term is defined in
Section 7(b)(ii) below) of the Executive, except as provided in this Section
7(b), all rights of the Executive under this Agreement (other than rights
already accrued) shall terminate.
(ii) The term "Permanent Disability" as used in this Agreement
shall mean, in the event a disability insurance policy is maintained by the
Company covering the Executive at such time and is in full force and effect, the
definition of permanent disability set forth in such policy. In the event no
disability insurance policy is maintained at such time and in full force and
effect, "Permanent Disability" shall mean the inability of the Executive, as
determined by the Board of Directors of the Company, by reason of physical or
mental disability to perform the duties required of her under this Agreement for
a period of one hundred and eighty (180) days in any one-year period. Successive
periods of disability, illness or incapacity will be considered separate periods
unless the later period of disability, illness or incapacity is due to the same
or related cause and commences less than six months from the ending of the
previous period of disability. Upon such determination, the Board of Directors
may terminate the Executive's employment under this Agreement upon ten (10)
days' prior written notice. If any determination of the Board of Directors with
respect to permanent disability is disputed by the Executive, the parties hereto
agree to abide by the decision of a panel of three physicians. The Executive and
Company shall each appoint one member, and the third member of the panel shall
be appointed by the other two members. The Executive agrees to make herself
available for and submit to ex-
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aminations by such physicians as may be directed by the Company. Failure to
submit to any such examination shall constitute a breach of a material part of
this Agreement.
8. OTHER TERMINATIONS
(a) BY THE EXECUTIVE. (i) The Executive may terminate the Executive's
employment hereunder upon giving at least ninety (90) days' prior written
notice. In addition, the Executive shall have the right to terminate the
Executive's employment hereunder on the conditions and at the times provided for
in Section 8(d) of this Agreement.
(ii) If the Executive gives notice pursuant to Section 8(a)(i)
above, the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing.
In any such event, the Executive shall be entitled to receive only the Base
Salary not yet paid, as would otherwise have been payable to the Executive up to
the end of the month specified as the month of termination in the termination
notice. In the event the Executive gives notice pursuant to Section 8(a)(i)
above but specifies a termination date in excess of ninety (90) days from the
date of such notice, the Company shall have the right (but not the obligation)
to accelerate the termination date to any date prior to the date specified in
the notice that is in excess of ninety (90) days from the date of the notice,
and the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing;
provided, however, that in any such event the Executive shall be entitled to
receive the Base Salary, as would otherwise have been payable to the Executive
up to the end of the month of the termination date properly selected by the
Company. Upon receiving the payments provided for under this Section 8(a), all
rights of the Executive under this Agreement (other than rights already accrued)
shall terminate.
(b) TERMINATION FOR "GOOD CAUSE". (i) Except as otherwise provided in
this Agreement, the Company may terminate the employment of the Executive
hereunder only for "good cause," which shall mean: (A) the Executive's
conviction of either a felony involving moral turpitude or any crime in
connection with the Executive's employment by the Company which causes the
Company a substantial detriment, but specifically shall not include traffic
offenses; (B) actions by the Executive as an executive officer of the Company
which clearly are contrary to the best interests of the Company; (C) the
Executive's willful failure to take actions permitted by law and necessary to
implement policies of the Company's Board of Directors which the Board of
Directors has communicated to her in writing, provided that minutes of a Board
of Directors meeting attended in its entirety by the Executive shall be deemed
communicated to the Executive; (D) the Executive's continued failure to attend
to the Executive's duties as an executive officer of the Company; or (E) the
Executive's use of or substantial dependence on alcohol or any narcotic drug or
other controlled or illegal substance, if such use or dependence renders the
Executive unable to perform his duties under this Agreement with or without
reasonable accommodation, or any illegal use of such substance during working
hours or while performing services under this Agreement. If any determination of
substantial dependence is disputed by the Executive, the parties hereto agree to
abide by the decision of a panel of three
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physicians appointed in the manner and subject to the same penalties for
noncompliance as specified in Section 7(b)(ii) of this Agreement.
(ii) Notwithstanding the foregoing, each of the foregoing
bases for termination specified in (A) through (E) of Subsection 8(b)(i) shall
constitute "Good Cause" only if (1) the Executive has been provided with written
notice of any assertion that there is a basis for termination for good cause
which notice shall specify in reasonable detail specific facts regarding any
such assertion and the Executive has been given a reasonable period of time
within which to remedy or cure the problem or complaint, (2) such notice is
provided to the Executive a reasonable time before the Board of Directors meets
to consider any possible termination for cause, (3) at or prior to the meeting
of the Board of Directors to consider the matters described in the written
notice, an opportunity is provided to the Executive and her counsel to be heard
by the Board of Directors with respect to the matters described in the written
notice, before it acts with respect to such matter, (4) any resolution or other
action by the Board of Directors with respect to any deliberation regarding or
decision to terminate the Executive for good cause is duly adopted by a vote of
a majority of the entire Board of Directors of the Company at a meeting of the
Board duly called and held and (5) the Executive is promptly provided with a
copy of the resolution or other corporate action taken with respect to such
termination.
(iii) If the employment of the Executive is terminated for
good cause under Section 8(b)(i) of this Agreement, the Company shall pay to the
Executive any Base Salary earned prior to the effective date of termination but
not yet paid and any cash bonus compensation earned pursuant to the provisions
of any incentive compensation plan then in effect but not paid to the Executive
prior to the effective date of such termination. Under such circumstances, such
payments shall be in full and complete discharge of any and all liabilities or
obligations of the Company to the Executive hereunder, and the Executive shall
be entitled to no further benefits under this Agreement (other than rights
already accrued).
(iv) Termination of the employment of the Executive other than
as expressly specified above in this Section 8(b) for good cause shall be deemed
to be a termination of employment "Without Good Cause."
(c) TERMINATION WITHOUT GOOD CAUSE. (i) Notwithstanding any other
provision of this Agreement, the Company shall have the right to terminate the
Executive's employment Without Good Cause pursuant to the provisions of this
Section 8(c). If after the Full-Time Employment Date the Company shall terminate
the employment of the Executive Without Good Cause effective on a date earlier
than the termination date provided for in Section 2 (with the effective date of
termination as so identified by the Company being referred to herein as the
"Accelerated Termination Date"), the Executive, until the end of the term of
this Agreement then in effect as provided for in Section 2 or until the date
which is 12 months after the Accelerated Termination Date, whichever is greater,
shall continue to receive (1) the Base Salary, paid in the same monthly on other
periodic installments ad in effect prior to the Accelerated Termination Date (2)
an amount equal to the target level of the annual cash bonus payable to the
Executive under the Company's Management Incentive Compensation Plan as
described on Exhibit A or any similar bonus or incentive plans or programs then
in effect (the "MICP Target Amount") in respect of the year during which the
Executive's employment terminates or, if greater, the MICP Target Amount
multiplied times the number of years (or fractions thereof) remaining in the
then unexpired term of this Agreement, and (3) any other cash or other bonus
compensation earned
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prior to the date of such termination pursuant to the terms of all incentive
compensation plans then in effect other than under the Company's Management
Incentive Compensation Plan as described on Exhibit A or any similar bonus or
incentive plans or programs then in effect; provided that, notwithstanding such
termination of employment, the Executive's covenants set forth in Section 10 and
Section 11 are intended to and shall remain in full force and effect and
provided further that in the event of such termination, the Company shall have
the right (but not the obligation) to relieve the Executive, in whole or in
part, of the Executive's duties under this Agreement, or direct the Executive to
no longer perform such duties, or direct that the Executive no longer be
required to report to work, or any combination of the foregoing.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Executive as a result of a
termination by the Company of the Executive's employment Without Good Cause, the
payments and benefits paid and provided pursuant to this Section 8(c) shall be
deemed to constitute liquidated damages and not a penalty for the Company's
termination of the Executive's employment Without Good Cause.
(d) CHANGE IN CONTROL. (i) For purposes of this Agreement, a "Change in
Control" shall mean the first to occur of:
(1) a change in control of the Company of a nature that
is required, pursuant to the Securities Exchange Act
of 1934 (the "1934 Act"), to be reported in response
to Item 1(a) of a Current Report on Form 8-K or Item
6(e) of Schedule 14A under the 1934 Act (in each case
under this Agreement, references to provisions of the
1934 Act and the rules and regulations promulgated
thereunder being understood to refer to such law,
rules and regulations as the same are in effect on
November 1, 1996); or
(2) the acquisition of "Beneficial Ownership" (as defined
in Rule 13d-3 under the 1934 Act) of the Company's
securities comprising 35% or more of the combined
voting power of the Company's outstanding securities
by any "person" (as that term is used in Sections
13(d) and 14(d)(2) of the 1934 Act and the rules and
regulations promulgated thereunder, but not including
any trustee or fiduciary acting in that capacity for
an employee benefit plan sponsored by the Company)
and such person's "affiliates" and "associates" (as
those terms are defined under the 1934 Act), but
excluding any ownership by the Executive and her
affiliates and associates; or
(3) the failure of the "Incumbent Directors" (as defined
below) to constitute at least a majority of all
directors of the Company (for these purposes,
"Incumbent Directors" means individuals who were the
directors of the Company on November 1, 1996, and,
after his or her election, any individual becoming a
director subsequent to November 1, 1996, whose
election, or nomination for election by the Company's
stockholders, is approved by a vote of at least
two-thirds of the directors then comprising the
Incumbent Directors, except that no individual shall
be considered an Incumbent Director who is not
recommended by management and whose initial
assumption of office as a director is in connection
with an actual or
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threatened "election contest" relating to the
"election of directors" of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A under the
1934 Act); or
(4) the closing of a sale of all or substantially all of
the assets of the Company;
(5) the Company's adoption of a plan of dissolution or
liquidation; or
(6) the closing of a merger or consolidation involving
the Company in which the Company is not the surviving
corporation or if, immediately following such merger
or consolidation, less than seventy-five percent
(75%) of the surviving corporation's outstanding
voting stock is held or is anticipated to be held by
persons who are stockholders of the Company
immediately prior to such merger or consolidation.
(ii) If after the Full-Time Employment Date a Change in
Control occurs, the Executive shall have the right, exercisable for a period of
one year thereafter, to immediately terminate this Agreement by delivering a
written statement to that effect to the Company (irrespective of any termination
or purported termination of this Agreement or the Executive's employment
hereunder by the Company on or at any time following such Change in Control) and
upon such a termination the Executive shall have the right to receive and the
Company shall be obligated to pay or provide to or on behalf of the Executive:
(A) as soon as reasonably practicable, but in no event following thirty (30)
days, after the Executive delivers such statement to the Company, in cash a lump
sum payment in an amount equal to the sum of (1) the "Control Cash Payment" as
that term is defined in Section 8(d)(iii) of this Agreement; (2) two times the
annual Base Salary then in effect (or in effect immediately prior to the Change
in Control, if greater), (3) two times the maximum level of the annual cash
bonus payable to the Executive under the Company's Management Incentive
Compensation Plan as described on Exhibit A (or any similar bonus or incentive
plans or programs then in effect), applicable to the year in which employment
terminates or the immediately preceding year, if greater, and (4) the additional
payments necessary to discharge certain tax liabilities (the "Gross Up") as that
term is defined in Section 13 of this Agreement; and (B) for a twenty-four (24)
month period after the date on which the Executive delivers such statement to
the Company, the benefits described in Section 3(f) of this Agreement that were
provided to the Executive (and her spouse and dependents, if applicable)
immediately prior to the Change in Control (on terms, conditions and benefit
levels no less favorable than those in effect immediately prior to the Change in
Control), including, without limitation, medical and other health benefits,
Basic Life Insurance and Optional Life Insurance, contributions or benefits
under all applicable tax-qualified or non-qualified profit-sharing, savings,
pension, retirement or deferred compensation plans, and all benefits and amounts
forfeited by the Executive on account of termination of the Executive's
employment under any employee benefit plans or programs of the Company or its
affiliates, but excluding disability benefits and directors and officers
liability insurance coverage, at the Company's sole cost and expense; provided
that the Company may, in its discretion, pay the Executive a cash lump-sum equal
to the economic equivalent of any such benefits (for example, the total gross
premiums due for any insurance coverage for the applicable period) on an
after-tax basis, as determined by the Company in good faith and reasonably
acceptable to the Executive, in lieu of providing such benefits in kind (the sum
of the foregoing amounts and benefits described in clauses (A) and (B) above,
other than the Gross Up, being referred to as the "Change in Control
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Payment"). If the Executive fails to exercise her rights under this Section
8(d)(ii) within one year following a Change in Control, such rights shall expire
and be of no further force or effect.
(iii) The "Control Cash Payment" shall be (A) $400,000, if the
first event to occur that constitutes a Change in Control occurs after December
31, 1997, but on or before December 31, 1998; (B) $600,000, if the first event
to occur that constitutes a Change in Control occurs after December 31, 1998,
but on or before December 31, 1999; or (C) $800,000, if the first event to occur
that constitutes a Change in Control occurs at any time after December 31, 1999.
(e) INTENTIONS REGARDING CERTAIN STOCK AND BENEFIT PLANS. Except as
otherwise provided herein, upon any termination of the Executive's employment
Without Good Cause or upon the occurrence of a Change in Control, it is the
intention of the parties that any and all vesting or performance requirements or
conditions affecting any outstanding restricted stock, performance stock, stock
option, stock appreciation right, bonus, award, right, grant or any other
incentive compensation under any of the Plans, under this Agreement, or
otherwise received, shall be deemed to be fully satisfied and any risk of
forfeiture with respect thereto shall be deemed to have lapsed.
(f) CERTAIN RIGHTS MUTUALLY EXCLUSIVE. The provisions of Section 8(c)
and Section 8(d) are mutually exclusive, provided, however, that if within one
year following commencement of an 8(c) payout there shall be a Change in Control
as defined in Section 8(d)(i), then the Executive shall be entitled to the
amounts and benefits payable to the Executive under Section 8(d)(ii) and Section
8(d)(iii) reduced by the amount that the Executive has received under Section
8(c) up to the date of the Change in Control. The triggering of the payment and
benefit requirements of Section 8(d) shall cause the provisions of Section 8(c)
to become inoperative.
9. DISCLOSURE
The Executive agrees that during the term of the Executive's employment
by the Company, the Executive will disclose and disclose only to the Company all
ideas, methods, plans, developments or improvements known by her which relate
directly or indirectly to the business of the Company, whether acquired by the
Executive before or during the Executive's employment by the Company. Nothing in
this Section 9 shall be construed as requiring any such communication where the
idea, plan, method or development is lawfully protected from disclosure as a
trade secret of a third party or by any other lawful prohibition against such
communication. The covenants of this Section 9 shall not be violated by ordinary
and customary communications with reporters, bankers and securities analysts and
other members of the investment community.
10. CONFIDENTIALITY
The Executive agrees to keep in strict secrecy and confidence any and
all information the Executive assimilates or to which the Executive has access
during the Executive's employment by the Company and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Company. The Executive agrees that both during and
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after the term of the Executive's employment by the Company, the Executive will
not, without the prior written consent of the Company, disclose any such
confidential information to any third person, partnership, joint venture,
company, corporation or other organization. The foregoing covenants shall not be
breached to the extent that any such confidential information becomes a matter
of general knowledge other than through a breach by the Executive of the
Executive's obligations under this Section 10.
11. NONCOMPETITION AND NONSOLICITATION
(a) GENERAL. The Executive hereby acknowledges that, during and solely
as a result of the Executive's employment by the Company, the Executive has
received and shall continue to receive: (1) special training and education with
respect to the operations of the Company's real estate development and
management businesses and its leasing, lending and financing activities, and
other related matters, and (2) access to confidential information and business
and professional contacts. In consideration of the special and unique
opportunities afforded to the Executive by the Company as a result of the
Executive's employment, as outlined in the previous sentence, the Executive
hereby agrees to the restrictive covenants in this Section 11.
(b) NONCOMPETITION. Notwithstanding anything in this Agreement to the
contrary, this section (b) shall only be effective after the Full-Time
Employment Date. During the term of the Executive's employment, whether pursuant
to this Agreement, any automatic or other renewal hereof or otherwise, and,
except as may be otherwise herein provided, for a period of two (2) years after
the termination of the Executive's employment with the Company, regardless of
the reason for such termination, the Executive shall not, directly or
indirectly, enter into, engage in, be employed by or consult with any business
which competes with the Company's real estate lending, leasing, development or
management businesses in Florida; provided, however, that, the foregoing to the
contrary notwithstanding, the restrictions of this Section 11(b) shall not apply
following termination of the Executive's employment under paragraph (c) or (d)
of Section 8 of this Agreement in connection with a Change in Control. The
Executive shall not engage in such prohibited activities, either as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, or representative or
salesman for any person, firm, partnership, corporation or other entity so
competing with the Company. The restrictions of this Section 11 shall not be
violated by (i) the ownership of no more than 2% of the outstanding securities
of any company whose stock is traded on a national securities exchange or is
quoted in the Automated Quotation System of the National Association of
Securities Dealers (NASDAQ), or (ii) other outside business investments that do
not in any manner conflict with the services to be rendered by the Executive for
the Company and that do not diminish or detract from the Executive's ability to
render the Executive's required attention to the business of the Company.
(c) NONSOLICITATION. During the Executive's employment with the Company
and, except as may be otherwise herein provided, for a period of two (2) years
following the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive agrees the
Executive will refrain from and will not, directly or indirectly, as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, representative,
salesman or otherwise solicit any of the
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employees of the Company to terminate their employment; provided, however, that,
the foregoing to the contrary notwithstanding, the restrictions of this Section
11(c) shall not apply following termination of the Executive's employment under
paragraph (c) or (d) of Section 8 of this Agreement in connection with a Change
in Control.
(d) TERM EXTENDED OR SUSPENDED. The period of time during which the
Executive is prohibited from engaging in certain business practices pursuant to
Sections 11(b) or (c) shall be extended by any length of time during which the
Executive is in breach of such covenants.
(e) ESSENTIAL ELEMENT. It is understood by and between the parties
hereto that the foregoing restrictive covenants set forth in Sections 11(a)
through (c) are essential elements of this Agreement, and that, but for the
agreement of the Executive to comply with such covenants, the Company would not
have agreed to enter into this Agreement. Such covenants by the Executive shall
be construed as agreements independent of any other provision in this Agreement.
The existence of any claim or cause of action of the Executive against the
Company, whether predicated on this Agreement, or otherwise, shall not
constitute a defense to the enforcement by the Company of such covenants.
(f) SEVERABILITY. It is agreed by the Company and Executive that if any
portion of the covenants set forth in this Section 11 are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographical area.
The Company and Executive agree that, if any court of competent jurisdiction
determines the specified time period or the specified geographical area
applicable to this Section 11 to be invalid, unreasonable, arbitrary or against
public policy, a lesser time period or geographical area which is determined to
be reasonable, non-arbitrary and not against public policy may be enforced
against the Executive. The Company and the Executive agree that the foregoing
covenants are appropriate and reasonable when considered in light of the nature
and extent of the business conducted by the Company.
12. SPECIFIC PERFORMANCE
The Executive agrees that damages at law will be an insufficient remedy
to the Company if the Executive violates the terms of Sections 9, 10 or 11 of
this Agreement and that the Company would suffer irreparable damage as a result
of such violation. Accordingly, it is agreed that the Company shall be entitled,
upon application to a court of competent jurisdiction, to obtain injunctive
relief to enforce the provisions of such Sections, which injunctive relief shall
be in addition to any other rights or remedies available to the Company. The
Executive agrees to pay to the Company all reasonable costs and expenses
incurred by the Company relating to the enforcement of the terms of Sections 9,
10 or 11 of this Agreement, including reasonable fees and reasonable
disbursements of counsel selected by the Company (during investigation and
before and at trial and in appellate proceedings).
13. PAYMENT OF EXCISE TAXES
(a) PAYMENT OF EXCISE TAXES. If the Executive is to receive any (1)
Change in Control Payment under Section 8(d), (2) any benefit or payment under
Section 7 as a result of or
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following the death or Permanent Disability of the Executive, (3) any benefit or
payment under Section 8(c) as a result of or following any termination of
employment hereunder Without Good Cause, or (4) any benefit or payment under the
Plans as a result of a Change in Control, following the death or Permanent
Disability of the Executive or following the termination of employment hereunder
Without Good Cause (such sections being referred to as the "Covered Sections"
and the benefits and payments to be received thereunder being referred to as the
"Covered Payments"), the Executive shall be entitled to receive the amount
described below to the extent applicable. If any Covered Payment(s) under any of
the Covered Sections or any other payments, awards, benefits or distributions
(or any acceleration or vesting of any such payment, award, benefit or
distribution) received or to be received by or on behalf of the Executive in
connection with a Change in Control or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other plan, program,
arrangement or agreement with the Company or any other person which effectuates
a Change in Control, or any affiliate of the Company or such other person)
(collectively, the "Payments") are subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986 (as amended from time to time, the
"Code"), or any successor or similar provision of the Code (the "Excise Tax"),
the Company shall pay the Executive an additional amount (the "Gross Up") such
that the net amount retained by the Executive after deduction of any Excise Tax
on the Payments and any federal, state and local income or employment tax,
social security tax, excise tax, or any interest or penalties imposed on any
amounts paid under this Section 13 shall, be equal to the Payments.
(b) CERTAIN ADJUSTMENT PAYMENTS. For purposes of determining the Gross
Up, the Executive shall be deemed to pay the federal income tax at the highest
marginal rate of taxation (currently 39.6%) in the calendar year in which the
payment to which the Gross Up applies is to be made and state and local income
taxes (if any) at the highest marginal rate of taxation in the state and
locality of Executive's residence on the last day of such calendar year. The
determination of whether such Excise Tax is payable and the amount thereof shall
be made upon the opinion of tax counsel selected by the Company and reasonably
acceptable to the Executive ("Tax Counsel"), applying the rules set forth in the
next sentence. For purposes of determining whether any of the Covered Payments
will be subject to the Excise Tax and the amount of the Excise Tax: (1) all
Payments shall be treated as "parachute payments," within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments," within the meaning
of Section 280G(b)(1) of the Code, shall be treated as subject to the Excise
Tax, unless in the opinion of Tax Counsel such Payments (other than Covered
Payments), in whole or in part, do not constitute such parachute payments, or
such excess parachute payments, in whole or in part, represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount," within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;
and (2) the value of any non-cash or deferred payments or benefits shall be
determined by a "big five" (or equivalent) international accounting firm
selected by the Company and reasonably acceptable to the Executive in accordance
with the principles of Section 280G(d)(3) and (4) of the Code. The Gross Up, if
any, that is due under this Section 13 shall be paid to the Executive in cash in
a lump sum within thirty (30) days after the date on which the amount thereof
has been determined or is reasonably determinable by Tax Counsel, and, in any
event, not later than thirty (30) days following termination of the Executive's
employment under this Agreement, provided that if the amount of the Gross Up
cannot be finally determined at or before such time, the amount paid shall be
the estimated full amount of the Gross Up as reasonably determined by Tax
Counsel in good faith in accordance with the principles described in this
Section 13. The Executive shall be
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entitled to retain her own advisor to verify, and consult with Tax Counsel in
connection with, any determination or computation related to the Excise Tax
and/or Gross Up. If Tax Counsel's opinion is not finally accepted by the
Internal Revenue Service upon audit or otherwise, or such an estimated Gross Up
is paid, then appropriate adjustments shall be computed (with additional Gross
Up, if applicable) by such Tax Counsel based upon the final amount of the Excise
Tax so determined; any additional amount due the Executive as a result of such
adjustment shall be paid to the Executive by the Company in cash in a lump sum
within thirty (30) days of such computation (including any interest or penalties
owed by the Executive to the Federal government by reason of any such
underpayment), or any amount due the Company as a result of such adjustment
shall be paid to the Company by the Executive in cash in a lump sum within
thirty (30) days of such computation. All fees, costs and expenses of Tax
Counsel and any accounting firm or other advisor retained in accordance with
this Section 13 shall be borne solely by the Company.
14. MISCELLANEOUS
(a) WAIVER OF BREACH. The waiver by either party to this Agreement of a
breach of any of the provisions of this Agreement by the other party shall not
be construed as a waiver of any subsequent breach by such other party.
(b) NO RIGHT TO CONTINUED EMPLOYMENT. Notwithstanding the fact that
certain provisions of this Agreement and/or Exhibit A reference a three year
cycle or provide for benefits upon a third year of employment, this Agreement
shall have a two year term with annual one year renewal terms subject to the
termination provisions contained herein.
(c) COMPLIANCE WITH OTHER AGREEMENTS. The Executive represents and
warrants that the execution of this Agreement by her and the Executive's
performance of the Executive's obligations hereunder will not conflict with,
result in the breach of any provision of or the termination of or constitute a
default under any Agreement to which the Executive is a party or by which the
Executive is or may be bound.
(d) BINDING EFFECT; ASSIGNMENT. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company. This Agreement is a personal
employment contract and the rights, obligations and interests of the Executive
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
(e) ENTIRE AGREEMENT. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof; provided, however, that nothing contained
in this Agreement shall be deemed to limit, reduce, waive or adversely affect
the benefits, payments and rights of participation to which the Executive and
his dependents and beneficiaries are entitled under the generally applicable
terms and conditions of any plan, policy, program or arrangement in which the
Executive or any such dependent or beneficiary participates during, and
following termination for any reason of, the Executive's employment under this
Agreement, or otherwise pursuant to applicable law. This Agreement may be
changed only by an agreement in writing signed by the party against whom any
waiver, change, amendment, modification or discharge is sought.
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(f) NO DUTY TO MITIGATE. The Executive shall be under no duty to
mitigate any loss of income as result of the termination of her employment
hereunder and any payments due the Executive upon termination of employment
shall not be reduced in respect of any other employment compensation received by
the Executive following such termination.
(g) FLORIDA LAW. This Agreement shall be construed pursuant to and
governed by the substantive laws of the State of Florida (except that any
provision of Florida law shall not apply if the law of a state or jurisdiction
other than Florida would otherwise apply).
(h) VENUE; PROCESS. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in and only in the Circuit Court of the Sixth
Judicial Circuit of the State of Florida in and for Pinellas County (the
"Circuit Court") and the parties agree that jurisdiction shall not properly lie
in any other jurisdiction provided, however, if jurisdiction does not properly
lie with the Circuit Court, the parties agree that jurisdiction and venue shall
properly lie in and only in the United States District Court for the Middle
District of Florida, Tampa Division. The parties hereby waive any objections
which they may now or hereafter have based on venue and/or forum non conveniens
and irrevocably submit to the jurisdiction of any such court in any legal suit,
action or proceeding arising out of or relating to this Agreement. The parties
further agree that the mailing by certified or registered mail, return receipt
requested, of any process required by any such court shall constitute valid and
lawful service of process against them, without the necessity for service by any
other means provided by statute or rule of court.
(i) HEADINGS. The headings of the various sections in this Agreement
are inserted for the convenience of the parties and shall not affect the
meaning, construction or interpretation of this Agreement.
(j) SEVERABILITY. Any provision of this Agreement which is determined
by a court of competent jurisdiction to be prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, unenforceability or non-authorization without
invalidating the remaining provisions hereof or affecting the validity,
enforceability or legality of such provision in any other jurisdiction. In any
such case, such determination shall not affect any other provision of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect. If any provision or term of this Agreement is susceptible to
two or more constructions or interpretations, one or more of which would render
the provision or term void or unenforceable, the parties agree that a
construction or interpretation which renders the term or provision valid shall
be favored.
(k) DEDUCTION FOR TAX PURPOSES. The Company's obligations to make
payments under this Agreement are independent of whether any or all of such
payments are deductible expenses of the Company for federal income tax purposes.
(l) ENFORCEMENT. If, within 10 days after demand to comply with the
obligations of one of the parties to this Agreement served in writing on the
other, compliance or reasonable assurance of compliance is not forthcoming, and
the party demanding compliance engages the services of an attorney to enforce
rights under this Agreement, the prevailing party in any action
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shall be entitled to recover all reasonable costs and expenses of enforcement
(including reasonable attorneys' fees and reasonable expenses during
investigation, before and at trial and in appellate proceedings). In addition,
each of the parties agrees to indemnify the other in respect of any and all
claims, losses, costs, liabilities and expenses, including reasonable fees and
reasonable disbursements of counsel (during investigation prior to initiation of
litigation and at trial and in appellate proceedings if litigation ensues),
directly or indirectly resulting from or arising out of a breach by the other
party of their respective obligations hereunder. The parties' costs of enforcing
this Agreement shall include prejudgment interest. Additionally, if any party
incurs any out-of-pocket expenses in connection with the enforcement of this
Agreement, all such amounts shall accrue interest at 18% per annum (or such
lower rate as may be required to avoid any limit imposed by applicable law)
commencing 30 days after any such expenses are incurred.
(m) NOTICES. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and three days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice shall be sent to:
To the Company: Echelon International Corporation
One Progress Plaza
St. Petersburg, FL 33701
Attn: Chairman of the Board
Telecopy: (727) 803-8201
To the Executive at the Executive's address herein first above written,
or to such other address as either party may specify by written notice to the
other.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ATTEST: ECHELON INTERNATIONAL CORPORATION
(Corporate Seal)
________________________________ By:____________________________________
Secretary Darryl A. LeClair, President
Date:____________________
Witnesses: EXECUTIVE
________________________________ _______________________________________
As to Executive SUSAN G. JOHNSON
Date:____________________
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EXHIBIT A TO
EMPLOYMENT AGREEMENT BETWEEN SUSAN G. JOHNSON
AND ECHELON INTERNATIONAL CORPORATION,
AMENDED AND RESTATED EFFECTIVE AS OF SEPTEMBER 18, 1998
The Company will establish a Management Incentive Compensation Plan
("MICP") for its senior management in which the Executive will participate.
During the first two full fiscal years of the Company's operation following the
completion of the Spinoff ending on December 31, 1997, and December 31, 1998,
respectively, and thereafter, as approved by the Board of Directors or the
Compensation Committee, which the Executive continues to be employed by the
Company under this Agreement (the "Covered Years"), the MICP will provide for
annual cash bonuses based upon the Company's net income for each of the Covered
Years. The Executive's participation in the MICP during the Covered Years shall
be based upon the criteria and shall include awards with the values indicated in
the tables set forth below and as more fully described in this Exhibit A.
MICP
During each of the Covered Years, (i) all MICP bonuses shall be paid in
cash; (ii) if Threshold Net Income is not achieved, no MICP cash bonus will be
paid; (iii) if actual net income exceeds Threshold Net Income, but is less than
Target Net Income, or exceeds Target Net Income but is less than Maximum Net
Income, the percentage of the MICP bonus shall be proportionately increased
above the Threshold bonus amount or the Target Bonus amount, as the case may be,
and (iv) if actual net income equals or exceeds Maximum Net Income, the Maximum
MICP cash bonus will be paid, but no additional cash bonus will be payable under
the MICP regardless of the amount by which actual net income in that Covered
Year exceeds Maximum Net Income. The following table sets forth information
regarding the MICP Net Income Threshold, Target and Maximum and cash bonuses.
- ------------------------------ --------------- ---------------- --------------
MICP 1997 1998 1999
(7 MONTHS)
- ------------------------------ --------------- ---------------- --------------
THRESHOLD
- ------------------------------ --------------- ---------------- --------------
Net Income $1,584,274 $1,768,816 $2,132,640
- ------------------------------ --------------- ---------------- --------------
MICP Cash Bonus $9,115 $24,938 $27,125
(% of Base Salary) (12.5%) (17.5%) (17.5%)
- ------------------------------ --------------- ---------------- --------------
TARGET
- ------------------------------ --------------- ---------------- --------------
Net Income $2,112,366 $2,358,422 $2,843,521
- ------------------------------ --------------- ---------------- --------------
MICP Cash Bonus $18,229 $49,875 $54,250
(% of Base Salary) (25%) (35%) (35%)
- ------------------------------ --------------- ---------------- --------------
MAXIMUM
- ------------------------------ --------------- ---------------- --------------
Net Income $2,640,457 $2,948,027 $3,554,401
- ------------------------------ --------------- ---------------- --------------
MICP Cash Bonus $27,344 $74,813 $81,375
(% of Base Salary) (37.5%) (52.5%) (52.5%)
- ------------------------------ --------------- ---------------- --------------
18
EXHIBIT 10.3
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT was made and entered into on the 20th day of
November, 1996, effective for all purposes as of the date specified below in
Section 2, and is now amended and restated effective as of September 18, 1998,
by and between ECHELON INTERNATIONAL CORPORATION, a Florida corporation (the
"Company"), and DARRYL A. LECLAIR, residing at 431 Appian Way, St. Petersburg,
Florida 33704 (the "Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM
Subject to the provisions for termination as hereinafter provided, the
term of employment under this Agreement shall begin as of the completion of the
"Distribution" as that term is defined in the Company's Registration Statement
on Form 10, as amended (the "Distribution"), and shall continue through December
31, 1999, provided, however, that beginning on January 1, 1998 and on each
January 1st thereafter (each such January 1 being referred to as a "Renewal
Date"), the term of this Agreement shall automatically be extended for an
additional one year so that on each Renewal Date the then remaining unexpired
term of this Agreement shall be three years, unless either party gives the other
written notice of termination at least ninety (90) days prior to any such
Renewal Date.
3. COMPENSATION
(a) BASE SALARY. The Company shall pay to the Executive as basic
compensation for all services rendered by the Executive during the term of this
Agreement a basic annualized salary of $280,000 per year, or such other sum in
excess of that amount as the parties may agree on from time to time or as
provided in the next sentence (as in effect from time to time, the "Base
Salary"), payable monthly or in other more frequent installments, as determined
by the Company. The Board of Directors of the Company (the "Board of Directors")
shall have no authority to reduce the Executive's Base Salary in effect from
time to time. In addition, the Board of Directors, in its discretion, may award
a bonus or bonuses to the Executive in addition to the bonuses provided for in
Section 3(b).
(b) BONUSES. In addition to the Base Salary to be paid pursuant to
Section 3(a), for each of the Company's three fiscal years ending December 31,
1997, December 31, 1998 and
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December 31, 1999 during the term of this Agreement, the Company shall pay as
incentive compensation the annual bonuses, to the extent earned, specified on
Exhibit A to this Agreement. For each fiscal year ending after December 31,
1999, the Company shall pay to the Executive as incentive compensation annual
bonuses in accordance with comparable incentive bonus plan(s) adopted by the
Board of Directors of the Company.
(c) CERTAIN PLANS AND INITIAL AWARD. (i) It is anticipated that the
Company will adopt certain incentive compensation plans, including a long term
incentive plan (the "LTIP"), providing for annual or other periodic awards to
key employees of, among other things, restricted stock, and a stock option plan
(the "ISO/NSO Plan"), providing for the annual or other periodic issuance of
options to purchase the Company's common stock. The LTIP and ISO/NSO Plan are
referred to collectively in this Agreement as the "Plans." The Executive will be
given an opportunity to participate in the Plans, in accordance with and subject
to the terms of the Plans as they may be adopted, amended and administered from
time to time.
(ii) In addition to the incentive compensation referred to in
Section 3(c)(i), the Company hereby agrees to issue to the Executive under the
LTIP, effective immediately following the completion of the Distribution, that
number of shares of the Company's common stock (the "Initial Restricted Stock")
as will equal three percent (3%) of the shares of the Company's common stock
distributed in the Distribution, which Initial Restricted Stock shall be subject
to risk of forfeiture, which risk will lapse as to one-fourth of the shares of
the Initial Restricted Stock on January 31, 1998, and as to an additional
one-fourth of the Initial Restricted Stock on each of January 31, 1999, January
31, 2000 and January 31, 2001. Accordingly, as of January 31, 2001, all risks of
forfeiture shall have lapsed as to all the Initial Restricted Stock.
(iii) In addition to the incentive compensation referred to in
Section 3(c)(i) and the Initial Restricted Stock, the Company hereby agrees to
grant to the Executive under the LTIP, effective immediately following the
completion of the Distribution, options to purchase that number of shares of the
Company's common stock (the "Initial Options") as will equal two percent (2%) of
the shares of the Company's common stock distributed in the Distribution, which
Initial Options shall be exercisable as to one-third of the shares of common
stock covered by the Initial Options on January 31, 1998, and as to an
additional one-third of such shares on each of January 31, 1999 and January 31,
2000. The exercise price for the Initial Options shall be the closing price on
the New York Stock Exchange (or such other market on which the Company's stock
trades if it is not listed on the New York Stock Exchange) on the trading day
which is the eighth month anniversary of the day of the completion of the
Distribution (the "Option Pricing Date"), or if the Option Pricing Date is not a
trading day, the first trading day thereafter.
(iv) Any and all risks of forfeiture shall lapse as to all of
the Initial Restricted Stock and the Initial Options shall be fully vested and
shall be exercisable as to all of the shares of common stock covered by the
Initial Options upon (i) the death of the Executive or termination of employment
upon the "Permanent Disability" (as that term is defined in Section 7(b)(ii) of
this Agreement) of the Executive, (ii) the termination of employment of the
Executive by the Company "Without Good Cause" (as that term is defined in
Section 8(b)(iii) of this Agreement) or (iii) the occurrence of a "Change in
Control" (as that term is defined in Section 8(d)(i) of this Agreement).
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(d) REIMBURSEMENT. The Company shall reimburse the Executive, in
accordance with the Company's policies and practices for senior management, for
all reasonable expenses incurred by the Executive in the performance of the
Executive's duties under this Agreement, provided, however, that the Executive
must furnish to the Company an itemized account, satisfactory to the Company, in
substantiation of such expenditures.
(e) CERTAIN BENEFITS. The Executive shall be entitled to such fringe
benefits including, but not limited to, medical and other insurance benefits as
may be provided from time to time by the Company to other senior officers of the
Company. In addition, without restricting the foregoing, the Company shall
provide the Executive at the Company's sole cost and expense with (i) a policy
or policies of term life insurance (the "Basic Life Insurance") providing, among
other things, basic death benefits of not less than two times the Base Salary in
effect from time to time, (ii) directors and officers liability insurance with
coverage, terms and limits suitable for the chief executive officer of a New
York Stock Exchange listed company comparable in financial size and wherewithal
to that of the Company and (iii) a monthly allowance of $500 cash to reimburse
the Executive for the use and maintenance of his automobile in furtherance of
the business and affairs of the Company, provided that the Executive shall at
all times insure the Executive and the Company in such amounts as may be
reasonably requested by the Company against claims for bodily injury, death and
property damages occurring as a result of its use. The Company shall use its
reasonable best efforts to make available to the Executive in providing and
paying for the Basic Life Insurance the opportunity to purchase at the
Executive's sole cost and expense additional life insurance with a basic death
benefit (the "Optional Life Insurance") equal to two times the Executive's Base
Salary in effect from time to time (affording the Executive the opportunity to
have basic death benefit life insurance coverage equal to four times such Base
Salary). The Company will use its reasonable best efforts to effect the transfer
of the ownership to the Executive of the policy or policies for the Basic Life
Insurance and the Optional Life Insurance, if any, upon the termination of the
Executive's employment by the Company. After the Executive's termination,
payment of any premiums would be the obligation of the Executive.
(f) OTHER INCENTIVE AND BENEFIT PLANS. The Executive shall be eligible
to participate, in accordance with the terms of such plans as they may be
adopted, amended and administered from time to time, in incentive, bonus,
benefit or similar plans, including without limitation, any stock option, bonus
or other equity ownership plan, any short, mid or long term incentive plan and
any other bonus, pension or profit sharing plans established by the Company from
time to time.
4. DUTIES
(a) GENERAL. The Executive is engaged as the Chief Executive Officer
and President of the Company and initially shall be elected as a director of the
Company. In addition, at the request of the Board of Directors, the Executive
shall serve in the same position or positions in any wholly owned subsidiary or
affiliate of the Company, without any additional compensation. The Executive's
duties shall be commensurate with those customarily associated with the chief
executive of a corporation comparable to the Company.
(b) SPECIFIC. In addition to his general duties, responsibilities and
authority as Chief
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Executive Officer and President, and without in any way intending to diminish
the Executive's duties, responsibilities and authority, the Executive's duties,
responsibilities and authority shall include but not be limited to (i)
suggesting to the Board of Directors persons who should serve as executive
officers for the Company and suggesting the duties, salaries, annual raises and
(except as may be limited by the specific provisions of bonus and incentive
plans adopted by the Company) the bonuses for such persons and the Board shall
give due and proper consideration to such suggestions, (ii) determining who
shall serve in all positions below the level of executive officer, and
determining the duties, salaries, annual raises and (except as may be limited by
the specific provisions of bonus and incentive plans adopted by the Company) the
bonuses for such persons, with authority to delegate authority regarding such
junior personnel to other members of senior management, (iii) participating in
consultation with the Board of Directors in the development and implementation
of the Company's strategic business plans and (iv) retaining consultants,
professionals and other independent contractors for the Company's business;
provided, however, that the selection of the Company's independent certified
public accountants and general counsel shall be made with the concurrence of the
Board of Directors.
(c) INDEMNIFICATION. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless the Executive for all liabilities,
costs, expenses and damages arising out of or in connection with the Executive's
service to the Company under this Agreement. In furtherance of this indemnity,
the Company shall enter into an indemnification agreement, in form and substance
reasonably satisfactory to the Executive and the Company. In addition, the
indemnity provided hereunder shall extend to service by the Executive as an
officer or director, or service in a similar capacity, for any civic, community
or charitable organization, provided such service is undertaken at the request
of or with the knowledge and acquiescence of the Company. The foregoing
indemnification shall be in addition to any rights or benefits the Executive may
have under statute, the Bylaws or Articles of Incorporation of the Company,
under a policy of insurance, or otherwise.
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF
(a) EXTENT OF SERVICES. During the term of the Executive's employment
under this Agreement, except during customary vacation periods and periods of
illness, the Executive shall devote full-time energy and attention during
regular business hours to the benefit and business of the Company as may be
reasonably necessary in performing the Executive's duties pursuant to this
Agreement. Notwithstanding the foregoing, the Executive may (i) serve on
corporate, trade association, civic, religious or charitable boards or
committees, (ii) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (iii) manage personal investments, so long as such
activities do not materially interfere with the performance of the Executive's
duties and responsibilities and do not create a conflict of interest.
(b) VACATIONS. The Executive shall be entitled to vacations with pay
and to such personal and sick leave with pay in accordance with the policy of
the Company as may be established from time to time by the Company and applied
to other senior officers of the Company. In no event shall the Executive be
entitled to fewer than four weeks' annual vacation. Unused vacation days may be
carried over from one year to the next for a period of up to three years. Any
vacation days which remain unused on the third anniversary of the end of the
fiscal year to which
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they originally related shall expire and shall thereafter no longer be useable
by the Executive.
6. FACILITIES
The Company shall provide the Executive with a fully furnished office,
and the facilities of the Company shall be generally available to the Executive
in the performance of the Executive's duties pursuant to this Agreement, it
being understood and contemplated by the parties that all equipment, supplies
and office personnel required in the performance of the Executive's duties under
this Agreement shall be supplied by and at the sole expense of the Company.
7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
(a) DEATH. If the Executive dies during the term of the Executive's
employment, the Company shall pay to the estate of the Executive within 30 days
after the date of death such Base Salary and any cash bonus compensation earned
pursuant to the provisions of any incentive compensation plan then in effect but
not yet paid, as would otherwise have been payable to the Executive up to the
end of the month in which the Executive's death occurs. After receiving the
payments provided in this Section 7(a), the Executive and the Executive's estate
shall have no further rights under this Agreement (other than those rights
already accrued).
(b) DISABILITY. (i) During any period of disability, illness or
incapacity during the term of this Agreement which renders the Executive at
least temporarily unable to perform the services required under this Agreement,
the Executive shall receive the Base Salary payable under Section 3(a) of this
Agreement plus any cash bonus compensation earned pursuant to the provisions of
any incentive compensation plan then in effect but not yet paid, less any cash
benefits received by him under any disability insurance carried by or provided
by the Company. Upon the Executive's "Permanent Disability" (as defined below),
which Permanent Disability continues during the payment periods specified
herein, the Company shall pay to the Executive for the period of time specified
below an amount (the "Disability Payment") equal to the (i) sum of (A) the Base
Salary paid in the same monthly or other period installments as in effect at the
time of the Executive's Permanent Disability plus (B) an amount equal to the
target level of the annual cash bonus payable to the Executive under the
Company's Management Incentive Compensation Plan as described on Exhibit A or
any similar bonus or incentive plans or programs then in effect (the "MICP
Target Amount") in respect of the fiscal year during which the Executive's
Permanent Disability occurred, which MICP Target Amount shall be paid in pro
rata equal monthly installments over the period of time specified below (ii)
reduced by the amount of any monthly payments under any policy of disability
income insurance paid for by the Company which payments are received during the
time when any Disability Payment is being made to the Executive following the
Executive's Permanent Disability. For so long as the Executive's Permanent
Disability continues, the Disability Payment shall be paid by the Company to the
Executive in equivalent installments at the same time or times as would have
been the case for payment of Base Salary over the unexpired term of this
Agreement if the Executive had not become permanently disabled and had remained
employed by the Company hereunder, but in no case shall such period exceed 36
months. The Executive may be entitled to
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receive payments under any disability income insurance which may be carried by
or provided by the Company from time to time. Upon "Permanent Disability" (as
that term is defined in Section 7(b)(ii) below) of the Executive, except as
provided in this Section 7(b) all rights of the Executive under this Agreement
(other than rights already accrued) shall terminate.
(ii) The term "Permanent Disability" as used in this Agreement
shall mean, in the event a disability insurance policy is maintained by the
Company covering the Executive at such time and is in full force and effect, the
definition of permanent disability set forth in such policy. In the event no
disability insurance policy is maintained at such time and in full force and
effect, "Permanent Disability" shall mean the inability of the Executive, as
determined by the Board of Directors of the Company, by reason of physical or
mental disability to perform the duties required of him under this Agreement for
a period of one hundred and eighty (180) days in any one-year period. Successive
periods of disability, illness or incapacity will be considered separate periods
unless the later period of disability, illness or incapacity is due to the same
or related cause and commences less than six months from the ending of the
previous period of disability. Upon such determination, the Board of Directors
may terminate the Executive's employment under this Agreement upon ten (10)
days' prior written notice. If any determination of the Board of Directors with
respect to permanent disability is disputed by the Executive, the parties hereto
agree to abide by the decision of a panel of three physicians. The Executive and
Company shall each appoint one member, and the third member of the panel shall
be appointed by the other two members. The Executive agrees to make himself
available for and submit to examinations by such physicians as may be directed
by the Company. Failure to submit to any such examination shall constitute a
breach of a material part of this Agreement.
8. OTHER TERMINATIONS
(a) BY THE EXECUTIVE. (i) The Executive may terminate the Executive's
employment hereunder upon giving at least ninety (90) days' prior written
notice. In addition, the Executive shall have the right to terminate the
Executive's employment hereunder on the conditions and at the times provided for
in Section 8(d) of this Agreement.
(ii) If the Executive gives notice pursuant to Section 8(a)(i)
above, the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing.
In any such event, the Executive shall be entitled to receive only the Base
Salary not yet paid, as would otherwise have been payable to the Executive up to
the end of the month specified as the month of termination in the termination
notice. In the event the Executive gives notice pursuant to Section 8(a)(i)
above but specifies a termination date in excess of ninety (90) days from the
date of such notice, the Company shall have the right (but not the obligation)
to accelerate the termination date to any date prior to the date specified in
the notice that is in excess of ninety (90) days from the date of the notice,
and the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing;
provided, however, that in any such event the Executive shall be entitled to
receive the Base Salary, as
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would otherwise have been payable to the Executive up to the end of the month of
the termination date properly selected by the Company. Upon receiving the
payments provided for under this Section 8(a), all rights of the Executive under
this Agreement (other than rights already accrued) shall terminate.
(b) TERMINATION FOR "GOOD CAUSE". (i) Except as otherwise provided in
this Agreement, the Company may terminate the employment of the Executive
hereunder only for "good cause," which shall mean (a) the willful, substantial,
continued and unjustified refusal of the Executive substantially to perform his
duties with the Company to the extent of his ability to do so (other than any
failure due to physical or mental incapacity) or (b) willful misconduct
materially and demonstrably injurious to the Company, financially or otherwise,
in each case, as determined in the reasonable discretion of the Board of
Directors, but with respect to each of the foregoing bases for termination
specified in the preceding clause, only if (1) the Executive has been provided
with written notice of any assertion that there is a basis for termination for
good cause which notice shall specify in reasonable detail specific facts
regarding any such assertion and the Executive has been given a reasonable
period of time within which to remedy or cure the problem or complaint, (2) such
notice is provided to the Executive a reasonable time before the Board of
Directors meets to consider any possible termination for cause, (3) at or prior
to the meeting of the Board of Directors to consider the matters described in
the written notice, an opportunity is provided to the Executive and his counsel
to be heard by the Board of Directors with respect to the matters described in
the written notice, before it acts with respect to such matter, (4) any
resolution or other action by the Board of Directors with respect to any
deliberation regarding or decision to terminate the Executive for good cause is
duly adopted by a vote of a majority of the entire Board of Directors of the
Company at a meeting of the Board duly called and held and (5) the Executive is
promptly provided with a copy of the resolution or other corporate action taken
with respect to such termination. No act or failure to act by the Executive
shall be considered willful unless done or omitted to be done by him not in good
faith and without reasonable belief that his action or omission was in the best
interests of the Company.
(ii) If the employment of the Executive is terminated for good
cause under Section 8(b)(i) of this Agreement, the Company shall pay to the
Executive any Base Salary earned prior to the effective date of termination but
not yet paid and any cash bonus compensation earned pursuant to the provisions
of any incentive compensation plan then in effect but not paid to the Executive
prior to the effective date of such termination. Under such circumstances, such
payments shall be in full and complete discharge of any and all liabilities or
obligations of the Company to the Executive hereunder, and the Executive shall
be entitled to no further benefits under this Agreement (other than rights
already accrued).
(iii) Termination of the employment of the Executive other
than as expressly specified above in Section 8(b)(i) for good cause shall be
deemed to be a termination of employment "Without Good Cause."
(c) TERMINATION WITHOUT GOOD CAUSE. (i) Notwithstanding any other
provision of this Agreement, the Company shall have the right to terminate the
Executive's employment Without Good Cause pursuant to the provisions of this
Section 8(c). If the Company shall terminate the employment of the Executive
Without Good Cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified
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by the Company being referred to herein as the "Accelerated Termination Date"),
the Executive, until the end of the term of this Agreement then in effect as
provided for in Section 2, but in no case shall such period exceed 36 months, or
until the date which is 24 months after the Accelerated Termination Date,
whichever is greater, shall continue to receive (1) the Base Salary, paid in the
same monthly or other periodic installments as in effect prior to the
Accelerated Termination Date (2) an equal monthly pro rata portion of an amount
of cash equal to the MICP Target Amount (as that term is defined in Section
7(b)(i)) in respect of the year during which the Executive's employment
terminates, multiplied times the number of years (or fractions thereof)
remaining in the then unexpired term of this Agreement or multiplied times two,
whichever is greater, plus (3) an equal monthly pro rata portion of an amount of
cash equal to the cash value of any bonus paid or to be paid to the Executive in
the form of performance shares or restricted stock under the LTIP as described
on Exhibit A or any similar bonus or incentive plans or programs then in effect
(valued, if applicable under the terms of such plans or programs, at the greater
of the closing price on the New York Stock Exchange, or other such market on
which the Company's stock trades if it is not listed on the New York Stock
Exchange, on the first trading day of the plan or program cycle or the
Accelerated Termination Date, or if the Accelerated Termination Date is not a
trading day, on the first trading day thereafter) in respect of the then-current
three year cycles of such plans or programs or such other cycle as is then in
effect, calculated as if the then-current cycles were completed and the target
levels attained (the "LTIP Target Amount"), which cash payment shall be in lieu
and in full satisfaction any rights under the LTIP in respect of such stock or
shares as described in Exhibit A or any similar bonus or incentive plans or
programs in effect at the time of such payment (all of which stock or shares
shall be cancelled upon such payment and receipt); provided however, if the
Accelerated Termination Date is prior to January 1, 1998, the amount of cash
payable to the Executive under the LTIP shall be $630,000, and (4) any other
cash or other bonus compensation earned prior to the date of such termination
pursuant to the terms of all incentive compensation plans then in effect other
than the Company's Management Incentive Compensation Plan as described on
Exhibit A or any similar bonus or incentive plans or programs then in effect;
provided that, notwithstanding such termination of employment, the Executive's
covenants set forth in Section 10 and Section 11 are intended to and shall
remain in full force and effect and provided further that in the event of such
termination, the Company shall have the right (but not the obligation) to
relieve the Executive, in whole or in part, of the Executive's duties under this
Agreement, or direct the Executive to no longer perform such duties, or direct
that the Executive no longer be required to report to work, or any combination
of the foregoing.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Executive as a result of a
termination by the Company of the Executive's employment Without Good Cause, the
payments and benefits paid and provided pursuant to this Section 8(c) shall be
deemed to constitute liquidated damages and not a penalty for the Company's
termination of the Executive's employment Without Good Cause.
(d) CHANGE IN CONTROL. (i) For purposes of this Agreement, a "Change in
Control" shall mean the first to occur of:
(1) a change in control of the Company of a nature that
is required, pursuant to the Securities Exchange Act
of 1934 (the "1934 Act"), to be reported in response
to Item 1(a) of a Current Report on Form 8-K or Item
6(e) of
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Schedule 14A under the 1934 Act (in each case under
this Agreement, references to provisions of the 1934
Act and the rules and regulations promulgated
thereunder being understood to refer to such law,
rules and regulations as the same are in effect on
November 1, 1996); or
(2) the acquisition of "Beneficial Ownership" (as defined
in Rule 13d-3 under the 1934 Act) of the Company's
securities comprising 35% or more of the combined
voting power of the Company's outstanding securities
by any "person" (as that term is used in Sections
13(d) and 14(d)(2) of the 1934 Act and the rules and
regulations promulgated thereunder, but not including
any trustee or fiduciary acting in that capacity for
an employee benefit plan sponsored by the Company)
and such person's "affiliates" and "associates" (as
those terms are defined under the 1934 Act), but
excluding any ownership by the Executive and his
affiliates and associates; or
(3) the failure of the "Incumbent Directors" (as defined
below) to constitute at least a majority of all
directors of the Company (for these purposes,
"Incumbent Directors" means individuals who were the
directors of the Company on November 1, 1996, and,
after his or her election, any individual becoming a
director subsequent to November 1, 1996, whose
election, or nomination for election by the Company's
stockholders, is approved by a vote of at least
two-thirds of the directors then comprising the
Incumbent Directors, except that no individual shall
be considered an Incumbent Director who is not
recommended by management and whose initial
assumption of office as a director is in connection
with an actual or threatened "election contest"
relating to the "election of directors" of the
Company, as such terms are used in Rule 14a-11 of
Regulation 14A under the 1934 Act); or
(4) the closing of a sale of all or substantially all of
the assets of the Company;
(5) the Company's adoption of a plan of dissolution or
liquidation; or
(6) the closing of a merger or consolidation involving
the Company in which the Company is not the surviving
corporation or if, immediately following such merger
or consolidation, less than seventy-five percent
(75%) of the surviving corporation's outstanding
voting stock is held or is anticipated to be held by
persons who are stockholders of the Company
immediately prior to such merger or consolidation.
(ii) If a Change in Control occurs, (I) any outstanding
indebtedness or obligation of the Executive to the Company or its affiliates
shall immediately and automatically be cancelled and deemed satisfied in full
(notwithstanding any other terms of such indebtedness or obligation to the
contrary), and the Company shall pay or reimburse the Executive for any income
or employment taxes imposed with respect to or arising out of such cancellation
or any payment or reimbursement under this clause (I); and (II) the Executive
shall have the right,
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exercisable for a period of one year thereafter, to immediately terminate this
Agreement by delivering a written statement to that effect to the Company
(irrespective of any termination or purported termination of this Agreement or
the Executive's employment hereunder by the Company on or at any time following
such Change in Control) and upon such a termination the Executive shall have the
right to receive and the Company shall be obligated to pay or provide to or on
behalf of the Executive: (A) as soon as reasonably practicable, but in no event
following thirty (30) days, after the Executive delivers such statement to the
Company, in cash a lump sum payment in an amount equal to the sum of (1) the
"Control Cash Payment" as that term is defined in Section 8(d)(iii) of this
Agreement; (2) three times the annual Base Salary then in effect (or in effect
immediately prior to the Change in Control, if greater), (3) three times the
maximum level of the annual cash bonus payable to the Executive under the
Company's Management Incentive Compensation Plan as described on Exhibit A (or
any similar bonus or incentive plans or programs then in effect), applicable to
the year in which employment terminates or the immediately preceding year, if
greater, (4) the cash value of the LTIP Target Amount (as that term is defined
in Section 8(c)), which cash payment shall be in lieu and in full satisfaction
of any rights under the LTIP in respect of such stock or shares as described in
Exhibit A or any similar bonus or incentive plans or programs in effect at the
time of such payment (all of which stock or shares shall be cancelled upon such
payment and receipt), other than any outstanding options to purchase the
Company's common stock held by the Executive (which shall not be so cancelled),
and (5) the additional payments necessary to discharge certain tax liabilities
(the "Gross Up") as that term is defined in Section 13 of this Agreement; and
(B) for a twenty-four (24) month period after the date on which the Executive
delivers such statement to the Company, the benefits described in Section 3(e)
of this Agreement that were provided to the Executive (and his spouse and
dependents, if applicable) immediately prior to the Change in Control (on terms,
conditions and benefit levels no less favorable than those in effect immediately
prior to the Change in Control), including, without limitation, medical and
other health benefits, Basic Life Insurance and Optional Life Insurance,
contributions or benefits under all applicable tax-qualified or non-qualified
profit-sharing, savings, pension, retirement or deferred compensation plans, and
all benefits and amounts forfeited by the Executive on account of termination of
the Executive's employment under any employee benefit plans or programs of the
Company or its affiliates, but excluding disability benefits and directors and
officers liability insurance coverage, at the Company's sole cost and expense;
provided that the Company may, in its discretion, pay the Executive a cash
lump-sum equal to the economic equivalent of any such benefits (for example, the
total gross premiums due for any insurance coverage for the applicable period)
on an after-tax basis, as determined by the Company in good faith and reasonably
acceptable to the Executive, in lieu of providing such benefits in kind (the sum
of the foregoing amounts and benefits described in clauses (I) and (II) above,
other than the Gross Up, being referred to as the "Change in Control Payment").
If the Executive fails to exercise his rights under clause (II) of this Section
8(d)(ii) within one year following a Change in Control, such rights shall expire
and be of no further force or effect.
(iii) The "Control Cash Payment" shall be (A) $500,000 if the
first event to occur that constitutes a Change in Control occurs on or before
December 31, 1997; (B) $1,000,000, if the first event to occur that constitutes
a Change in Control occurs after December 31, 1997 but on or before December 31,
1998; (C) $1,500,000, if the first event to occur that constitutes a Change in
Control occurs after December 31, 1998 but on or before December 31, 1999; or
(D) $2,000,000, if the first event to occur that constitutes a Change in Control
occurs at any time
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after December 31, 1999.
(e) INTENTIONS REGARDING CERTAIN STOCK AND BENEFIT PLANS. Except as
otherwise provided herein, upon any termination of the Executive's employment
Without Good Cause or upon the occurrence of a Change in Control, it is the
intention of the parties that any and all vesting or performance requirements or
conditions affecting any outstanding restricted stock, performance stock, stock
option, stock appreciation right, bonus, award, right, grant or any other
incentive compensation under any of the Plans, under this Agreement, or
otherwise received, shall be deemed to be fully satisfied and any risk of
forfeiture with respect thereto shall be deemed to have lapsed.
(f) CERTAIN RIGHTS MUTUALLY EXCLUSIVE. The provisions of Section 8(c)
and Section 8(d) are mutually exclusive, provided, however, that if within one
year following commencement of an 8(c) payout there shall be a Change in Control
as defined in Section 8(d)(i), then the Executive shall be entitled to the
amounts and benefits payable to the Executive under Section 8(d)(ii) and Section
8(d)(iii) reduced by the amount that the Executive has received under Section
8(c) up to the date of the Change in Control. The triggering of the payment and
benefit requirements of Section 8(d) shall cause the provisions of Section 8(c)
to become inoperative.
9. DISCLOSURE
The Executive agrees that during the term of the Executive's employment
by the Company, the Executive will disclose and disclose only to the Company all
ideas, methods, plans, developments or improvements known by him which relate
directly or indirectly to the business of the Company, whether acquired by the
Executive before or during the Executive's employment by the Company. Nothing in
this Section 9 shall be construed as requiring any such communication where the
idea, plan, method or development is lawfully protected from disclosure as a
trade secret of a third party or by any other lawful prohibition against such
communication. The covenants of this Section 9 shall not be violated by ordinary
and customary communications with reporters, bankers and securities analysts and
other members of the investment community.
10. CONFIDENTIALITY
The Executive agrees to keep in strict secrecy and confidence any and
all information the Executive assimilates or to which the Executive has access
during the Executive's employment by the Company and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Company. The Executive agrees that both during and after the term of the
Executive's employment by the Company, the Executive will not, without the prior
written consent of the Company, disclose any such confidential information to
any third person, partnership, joint venture, company, corporation or other
organization. The foregoing covenants shall not be breached to the extent that
any such confidential information becomes a matter of general knowledge other
than through a breach by the Executive of the Executive's obligations under this
Section 10.
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11. NONCOMPETITION AND NONSOLICITATION
(a) GENERAL. The Executive hereby acknowledges that, during and solely
as a result of the Executive's employment by the Company, the Executive has
received and shall continue to receive: (1) special training and education with
respect to the operations of the Company's real estate development and
management businesses and its leasing, lending and financing activities, and
other related matters, and (2) access to confidential information and business
and professional contacts. In consideration of the special and unique
opportunities afforded to the Executive by the Company as a result of the
Executive's employment, as outlined in the previous sentence, the Executive
hereby agrees to the restrictive covenants in this Section 11.
(b) NONCOMPETITION. During the term of the Executive's employment,
whether pursuant to this Agreement, any automatic or other renewal hereof or
otherwise, and, except as may be otherwise herein provided, for a period of two
(2) years after the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive shall not, directly
or indirectly, enter into, engage in, be employed by or consult with any
business which competes with the Company's real estate lending, leasing,
development or management businesses in Florida; provided, however, that, the
foregoing to the contrary notwithstanding, the restrictions of this Section
11(b) shall not apply following termination of the Executive's employment under
paragraph (c) or (d) of Section 8 of this Agreement in connection with a Change
in Control. The Executive shall not engage in such prohibited activities, either
as an individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, or representative or
salesman for any person, firm, partnership, corporation or other entity so
competing with the Company. The restrictions of this Section 11 shall not be
violated by (i) the ownership of no more than 2% of the outstanding securities
of any company whose stock is traded on a national securities exchange or is
quoted in the Automated Quotation System of the National Association of
Securities Dealers (NASDAQ), or (ii) other outside business investments that do
not in any manner conflict with the services to be rendered by the Executive for
the Company and that do not diminish or detract from the Executive's ability to
render the Executive's required attention to the business of the Company.
(c) NONSOLICITATION. During the Executive's employment with the Company
and, except as may be otherwise herein provided, for a period of two (2) years
following the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive agrees the
Executive will refrain from and will not, directly or indirectly, as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, representative,
salesman or otherwise solicit any of the employees of the Company to terminate
their employment; provided, however, that, the foregoing to the contrary
notwithstanding, the restrictions of this Section 11(c) shall not apply
following termination of the Executive's employment under paragraph (c) or (d)
of Section 8 of this Agreement in connection with a Change in Control.
(d) TERM EXTENDED OR SUSPENDED. The period of time during which the
Executive is prohibited from engaging in certain business practices pursuant to
Sections 11(b) or (c) shall be extended by any length of time during which the
Executive is in breach of such covenants.
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(e) ESSENTIAL ELEMENT. It is understood by and between the parties
hereto that the foregoing restrictive covenants set forth in Sections 11(a)
through (c) are essential elements of this Agreement, and that, but for the
agreement of the Executive to comply with such covenants, the Company would not
have agreed to enter into this Agreement. Such covenants by the Executive shall
be construed as agreements independent of any other provision in this Agreement.
The existence of any claim or cause of action of the Executive against the
Company, whether predicated on this Agreement, or otherwise, shall not
constitute a defense to the enforcement by the Company of such covenants.
(f) SEVERABILITY. It is agreed by the Company and Executive that if any
portion of the covenants set forth in this Section 11 are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographical area.
The Company and Executive agree that, if any court of competent jurisdiction
determines the specified time period or the specified geographical area
applicable to this Section 11 to be invalid, unreasonable, arbitrary or against
public policy, a lesser time period or geographical area which is determined to
be reasonable, non-arbitrary and not against public policy may be enforced
against the Executive. The Company and the Executive agree that the foregoing
covenants are appropriate and reasonable when considered in light of the nature
and extent of the business conducted by the Company.
12. SPECIFIC PERFORMANCE
The Executive agrees that damages at law will be an insufficient remedy
to the Company if the Executive violates the terms of Sections 9, 10 or 11 of
this Agreement and that the Company would suffer irreparable damage as a result
of such violation. Accordingly, it is agreed that the Company shall be entitled,
upon application to a court of competent jurisdiction, to obtain injunctive
relief to enforce the provisions of such Sections, which injunctive relief shall
be in addition to any other rights or remedies available to the Company. The
Executive agrees to pay to the Company all reasonable costs and expenses
incurred by the Company relating to the enforcement of the terms of Sections 9,
10 or 11 of this Agreement, including reasonable fees and reasonable
disbursements of counsel selected by the Company (during investigation and
before and at trial and in appellate proceedings).
13. PAYMENT OF EXCISE TAXES
(a) PAYMENT OF EXCISE TAXES. If the Executive is to receive any (1)
Change in Control Payment under Section 8(d), (2) any benefit or payment under
Section 7 as a result of or following the death or Permanent Disability of the
Executive, (3) any benefit or payment under Section 8(c) as a result of or
following any termination of employment hereunder Without Good Cause, or (4) any
benefit or payment under the Plans as a result of a Change in Control, following
the death or Permanent Disability of the Executive or following the termination
of employment hereunder Without Good Cause (such sections being referred to as
the "Covered Sections" and the benefits and payments to be received thereunder
being referred to as the "Covered Payments"), the Executive shall be entitled to
receive the amount described below to the extent applicable. If any Covered
Payment(s) under any of the Covered Sections or any other
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payments, awards, benefits or distributions (or any acceleration or vesting of
any such payment, award, benefit or distribution) received or to be received by
or on behalf of the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, program, arrangement or agreement with the Company
or any other person which effectuates a Change in Control, or any affiliate of
the Company or such other person) (collectively, the "Payments") are subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (as
amended from time to time, the "Code"), or any successor or similar provision of
the Code (the "Excise Tax"), the Company shall pay the Executive an additional
amount (the "Gross Up") such that the net amount retained by the Executive after
deduction of any Excise Tax on the Payments and any federal, state and local
income or employment tax, social security tax, excise tax, or any interest or
penalties imposed on any amounts paid under this Section 13 shall, be equal to
the Payments.
(b) CERTAIN ADJUSTMENT PAYMENTS. For purposes of determining the Gross
Up, the Executive shall be deemed to pay the federal income tax at the highest
marginal rate of taxation (currently 39.6%) in the calendar year in which the
payment to which the Gross Up applies is to be made and state and local income
taxes (if any) at the highest marginal rate of taxation in the state and
locality of Executive's residence on the last day of such calendar year. The
determination of whether such Excise Tax is payable and the amount thereof shall
be made upon the opinion of tax counsel selected by the Company and reasonably
acceptable to the Executive ("Tax Counsel"), applying the rules set forth in the
next sentence. For purposes of determining whether any of the Covered Payments
will be subject to the Excise Tax and the amount of the Excise Tax: (1) all
Payments shall be treated as "parachute payments," within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments," within the meaning
of Section 280G(b)(1) of the Code, shall be treated as subject to the Excise
Tax, unless in the opinion of Tax Counsel such Payments (other than Covered
Payments), in whole or in part, do not constitute such parachute payments, or
such excess parachute payments, in whole or in part, represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount," within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;
and (2) the value of any non-cash or deferred payments or benefits shall be
determined by a "big five" (or equivalent) international accounting firm
selected by the Company and reasonably acceptable to the Executive in accordance
with the principles of Section 280G(d)(3) and (4) of the Code. The Gross Up, if
any, that is due under this Section 13 shall be paid to the Executive in cash in
a lump sum within thirty (30) days after the date on which the amount thereof
has been determined or is reasonably determinable by Tax Counsel, and, in any
event, not later than thirty (30) days following termination of the Executive's
employment under this Agreement; provided that if the amount of the Gross Up
cannot be finally determined at or before such time, the amount paid shall be
the estimated full amount of the Gross Up as reasonably determined by Tax
Counsel in good faith in accordance with the principles described in this
Section 13. The Executive shall be entitled to retain his own advisor to verify,
and consult with Tax Counsel in connection with, any determination or
computation related to the Excise Tax and/or Gross Up. If Tax Counsel's opinion
is not finally accepted by the Internal Revenue Service upon audit or otherwise,
or such an estimated Gross Up is paid, then appropriate adjustments shall be
computed (with additional Gross Up, if applicable) by such Tax Counsel based
upon the final amount of the Excise Tax so determined; any additional amount due
the Executive as a result of such adjustment shall be paid to the Executive by
the Company in cash in a lump sum within thirty (30) days of such
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computation (including any interest or penalties owed by the Executive to the
Federal government by reason of any such underpayment), or any amount due the
Company as a result of such adjustment shall be paid to the Company by the
Executive in cash in a lump sum within thirty (30) days of such computation. All
fees, costs and expenses of Tax Counsel and any accounting firm or other advisor
retained in accordance with this Section 13 shall be borne solely by the
Company.
14. MISCELLANEOUS
(a) WAIVER OF BREACH. The waiver by either party to this Agreement of a
breach of any of the provisions of this Agreement by the other party shall not
be construed as a waiver of any subsequent breach by such other party.
(b) COMPLIANCE WITH OTHER AGREEMENTS. The Executive represents and
warrants that the execution of this Agreement by him and the Executive's
performance of the Executive's obligations hereunder will not conflict with,
result in the breach of any provision of or the termination of or constitute a
default under any Agreement to which the Executive is a party or by which the
Executive is or may be bound.
(c) BINDING EFFECT; ASSIGNMENT. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company. This Agreement is a personal
employment contract and the rights, obligations and interests of the Executive
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
(d) ENTIRE AGREEMENT. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof; provided, however, that nothing contained
in this Agreement shall be deemed to limit, reduce, waive or adversely affect
the benefits, payments and rights of participation to which the Executive and
his dependents and beneficiaries are entitled under the generally applicable
terms and conditions of any plan, policy, program or arrangement in which the
Executive or any such dependent or beneficiary participates during, and
following termination for any reason of, the Executive's employment under this
Agreement, or otherwise pursuant to applicable law. This Agreement may be
changed only by an agreement in writing signed by the party against whom any
waiver, change, amendment, modification or discharge is sought.
(e) HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
(f) NO DUTY TO MITIGATE. The Executive shall be under no duty to
mitigate any loss of income as result of the termination of his employment
hereunder and any payments due the Executive upon termination of employment
shall not be reduced in respect of any other employment compensation received by
the Executive following such termination.
(g) FLORIDA LAW. This Agreement shall be construed pursuant to and
governed by the
15
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substantive laws of the State of Florida (except that any provision of Florida
law shall not apply if the law of a state or jurisdiction other than Florida
would otherwise apply).
(h) VENUE; PROCESS. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in and only in the Circuit Court of the Sixth
Judicial Circuit of the State of Florida in and for Pinellas County (the
"Circuit Court") and the parties agree that jurisdiction shall not properly lie
in any other jurisdiction provided, however, if jurisdiction does not properly
lie with the Circuit Court, the parties agree that jurisdiction and venue shall
properly lie in and only in the United States District Court for the Middle
District of Florida, Tampa Division. The parties hereby waive any objections
which they may now or hereafter have based on venue and/or forum non conveniens
and irrevocably submit to the jurisdiction of any such court in any legal suit,
action or proceeding arising out of or relating to this Agreement. The parties
further agree that the mailing by certified or registered mail, return receipt
requested, of any process required by any such court shall constitute valid and
lawful service of process against them, without the necessity for service by any
other means provided by statute or rule of court.
(i) SEVERABILITY. Any provision of this Agreement which is determined
by a court of competent jurisdiction to be prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, unenforceability or non-authorization without
invalidating the remaining provisions hereof or affecting the validity,
enforceability or legality of such provision in any other jurisdiction. In any
such case, such determination shall not affect any other provision of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect. If any provision or term of this Agreement is susceptible to
two or more constructions or interpretations, one or more of which would render
the provision or term void or unenforceable, the parties agree that a
construction or interpretation which renders the term or provision valid shall
be favored.
(j) DEDUCTION FOR TAX PURPOSES. The Company's obligations to make
payments under this Agreement are independent of whether any or all of such
payments are deductible expenses of the Company for federal income tax purposes.
(k) ENFORCEMENT. If, within 10 days after demand to comply with the
obligations of one of the parties to this Agreement served in writing on the
other, compliance or reasonable assurance of compliance is not forthcoming, and
the party demanding compliance engages the services of an attorney to enforce
rights under this Agreement, the prevailing party in any action shall be
entitled to recover all reasonable costs and expenses of enforcement (including
reasonable attorneys' fees and reasonable expenses during investigation, before
and at trial and in appellate proceedings). In addition, each of the parties
agrees to indemnify the other in respect of any and all claims, losses, costs,
liabilities and expenses, including reasonable fees and reasonable disbursements
of counsel (during investigation prior to initiation of litigation and at trial
and in appellate proceedings if litigation ensues), directly or indirectly
resulting from or arising out of a breach by the other party of their respective
obligations hereunder. The parties' costs of enforcing this Agreement shall
include prejudgment interest. Additionally, if any party incurs any
out-of-pocket expenses in connection with the enforcement of this Agreement, all
such amounts shall accrue interest at 10% per annum (or such lower rate as may
be required to
16
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avoid any limit imposed by applicable law) commencing 30 days after any such
expenses are incurred.
(l) NOTICES. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and three days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice shall be sent to:
To the Company: Echelon International Corporation.
One Progress Plaza
St. Petersburg, FL 33701
Attn: Chairman of the Board
Telecopy: (727) 803-8201
To the Executive at the Executive's address herein first above written,
or to such other address as either party may specify by written notice to the
other.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ATTEST: ECHELON INTERNATIONAL CORPORATION
(Corporate Seal)
________________________________ By:____________________________________
Secretary Name: Larry J. Newsome
Title:
Date:_______________________
Witnesses: EXECUTIVE
________________________________ ______________________________________
As to Executive DARRYL A. LECLAIR
18
<PAGE>
EXHIBIT A
TO
EMPLOYMENT AGREEMENT BETWEEN DARRYL A. LECLAIR AND
ECHELON INTERNATIONAL CORPORATION,
AMENDED AND RESTATED EFFECTIVE AS OF SEPTEMBER 18, 1998
The Company will establish a Management Incentive Compensation Plan
("MICP") and Long Term Incentive Plan ("LTIP") for its senior management in
which the Executive will participate. During the first three full fiscal years
of the Company's operation following the completion of the Spinoff ending on
December 31, 1997, 1998 and 1999, respectively, and thereafter, as approved by
the Board of Directors or the Compensation Committee thereof, while the
Executive continues to be employed by the Company under this Agreement (the
"Covered Years"), the MICP will provide for annual cash bonuses based upon the
Company's net income for each of the Covered Years. The LTIP will provide the
opportunity to earn restricted shares based upon the Company's cumulative
results of operation for three year cycles, beginning with the three year cycle
comprising the Covered Years ending December 31, 1999 (the "Cycle Years"). The
Executive's participation in the MICP and the LTIP during the Covered Years
shall be based upon the criteria and shall include awards with the values
indicated in the tables set forth below and as more fully described in this
Exhibit A.
MICP
During each of the Covered Years, (i) all MICP bonuses shall be paid in
cash; (ii) if Threshold Net Income is not achieved, no MICP cash bonus will be
paid; (iii) if actual net income exceeds Threshold Net Income, but is less than
Target Net Income, or exceeds Target Net Income but is less than Maximum Net
Income, the percentage of the MICP bonus shall be proportionately increased
above the Threshold bonus amount or the Target Bonus amount, as the case may be,
and (iv) if actual net income equals or exceeds Maximum Net Income, the Maximum
MICP cash bonus will be paid, but no additional cash bonus will be payable under
the MICP regardless of the amount by which actual net income in that Covered
Year exceeds Maximum Net Income. The following table sets forth information
regarding the MICP Net Income Threshold, Target and Maximum and cash bonuses.
19
<PAGE>
- ------------------------------ --------------- --------------- ---------------
MICP 1997 1998 1999
- ------------------------------ --------------- --------------- ---------------
THRESHOLD
- ------------------------------ --------------- --------------- ---------------
Net Income $1,584,274 $1,768,816 $2,132,640
- ------------------------------ --------------- --------------- ---------------
MICP Cash Bonus $70,000 $70,000 $70,000
(% of Base Salary) (25%) (25%) (25%)
- ------------------------------ --------------- --------------- ---------------
TARGET
- ------------------------------ --------------- --------------- ---------------
Net Income $2,112,366 $2,358,422 $2,843,521
- ------------------------------ --------------- --------------- ---------------
MICP Cash Bonus $140,000 $140,000 $140,000
(% of Base Salary) (50%) (50%) (50%)
- ------------------------------ --------------- --------------- ---------------
MAXIMUM
- ------------------------------ --------------- --------------- ---------------
Net Income $2,640,457 $2,948,027 $3,554,401
- ------------------------------ --------------- --------------- ---------------
MICP Cash Bonus $210,000 $210,000 $210,000
(% of Base Salary) (75%) (75%) (75%)
- ------------------------------ --------------- --------------- ---------------
Notwithstanding the foregoing and the information contained in any of
the tables contained in this Exhibit, and regardless of the actual net income
achieved by the Company in the first Covered Year, the MICP cash bonus shall not
be less than the amount of the MICP cash bonus that would be payable if the
Target Net Income was achieved in the first Covered Year (50% of Base Salary).
20
<PAGE>
LTIP
1997, 1998, 1999 CYCLE YEARS
The sum of each year's Threshold Net Income for the three 1997, 1998
and 1999 Cycle Years shall be referred to as the "Threshold LTIP Net Income";
the sum of each year's Target Net Income for the three such Cycle Years shall be
referred to as "Target LTIP Net Income"; and the sum of each year's Maximum Net
Income for the three such Cycle Years shall be referred to as "Maximum LTIP Net
Income," in each case, as set forth in the following tables:
<TABLE>
<CAPTION>
- ----------------------- ------------------ ------------------ ------------------- --------------------
LTIP 1997 1998 1999 LTIP NET INCOME
- ----------------------- ------------------ ------------------ ------------------- --------------------
<S> <C> <C> <C> <C>
THRESHOLD THRESHOLD
- ----------------------- ------------------ ------------------ ------------------- ---------------------
Net Income $1,584,274.00 $1,768,816.00 $2,132,640.00 $5,485,730.00
- ----------------------- ------------------ ------------------ ------------------- ---------------------
TARGET TARGET
- ----------------------- ------------------ ------------------ ------------------- ---------------------
Net Income $2,112,366.00 $2,358,422.00 $2,843,521.00 $7,314,309.00
- ----------------------- ------------------ ------------------ ------------------- ---------------------
MAXIMUM MAXIMUM
- ----------------------- ------------------ ------------------ ------------------- ---------------------
Net Income $2,640,457.00 $2,948,027.00 $3,554,401.00 $9,142,885.00
- ----------------------- ------------------ ------------------ ------------------- ---------------------
</TABLE>
The following table sets forth information regarding the Threshold,
Target and Maximum LTIP Net Income and values associated with achieving such
levels of cumulative net income:
- --------------------------- ----------------------
LTIP THREE YEARS ENDING
DECEMBER 31, 1999
- --------------------------- ----------------------
THRESHOLD
- --------------------------- ----------------------
Cumulative Net Income $5,485,730.00
- --------------------------- ----------------------
LTIP Value $315,000
(% of Base Salary) (37.5%)
- --------------------------- ----------------------
TARGET
- --------------------------- ----------------------
Cumulative Net Income $7,314,309.00
- --------------------------- ----------------------
LTIP Value $630,000
(% of Base Salary) (75%)
- --------------------------- ----------------------
MAXIMUM
- --------------------------- ----------------------
Cumulative Net Income $9,142,885.00
- --------------------------- ----------------------
LTIP Value $945,000
(% of Base Salary) (112.5%)
- --------------------------- ----------------------
For purposes of administering the LTIP, during the 1997, 1998, 1999
three-year cycle, (i)
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<PAGE>
all LTIP awards shall be paid in the form of restricted shares; (ii) the number
of restricted shares shall be determined by dividing the dollar value of the
Maximum LTIP Value, $945,000, by the closing price on January 1, 1998, or the
first trading day thereafter, on the New York Stock Exchange (or such other
market on which the Company's stock trades if it is not listed on the New York
Stock Exchange); (iii) the restricted shares, among other things, shall be
subject to a risk of forfeiture if and to the extent that the performance
criteria set forth in this Exhibit A with respect to the 1998, 1999, 2000 Cycle
Years are not met; (iv) if actual cumulative net income for the three-year
period ending December 31, 1999, does not equal or exceed Threshold LTIP Net
Income for such period, all restricted shares shall be forfeited, and no LTIP
bonus will have been earned; (v) if actual cumulative net income for the three
year period ending December 31, 1999, exceeds Threshold LTIP Net Income, but is
less than Target LTIP Net Income, for such period, or exceeds Target LTIP Net
Income, but is less than Maximum LTIP Net Income, for such period, the
percentage of the LTIP restricted shares as to which the risk of forfeiture
shall lapse shall be proportionately increased above the Threshold bonus amount
or the Target bonus amount, as the case may be; and (vi) if cumulative net
income for the three-year period ending December 31, 1999 equals or exceeds
Maximum LTIP Net Income for such period, the risk of forfeiture shall lapse as
to all restricted shares, but no additional shares will be issuable under the
LTIP regardless of the amount by which actual cumulative net income for the
three years ending December 31, 1999 exceeds such Maximum LTIP Net Income.
1998, 1999, 2000 CYCLE YEARS
The sum of each year's Threshold Net Income for the three 1998, 1999
and 2000 Cycle Years shall be referred to as the "Threshold LTIP Net Income";
the sum of each year's Target Net Income for the three such Cycle Years shall be
referred to as "Target LTIP Net Income"; and the sum of each year's Maximum Net
Income for the three such Cycle Years shall be referred to as "Maximum LTIP Net
Income," in each case, as set forth in the following tables:
<TABLE>
<CAPTION>
LTIP 1998 1999 2000 LTIP NET INCOME
- ----------------------- ------------------ ------------------ ------------------- ---------------------
<S> <C> <C> <C> <C>
THRESHOLD THRESHOLD
- ----------------------- ------------------ ------------------ ------------------- ---------------------
Net Income $1,768,816.00 $2,132,640.00 $4,848,000.00 $8,749,456.00
- ----------------------- ------------------ ------------------ ------------------- ---------------------
TARGET TARGET
- ----------------------- ------------------ ------------------ ------------------- ---------------------
Net Income $2,358,422.00 $2,843,521.00 $6,464,000.00 $11,665,943.00
- ----------------------- ------------------ ------------------ ------------------- ---------------------
MAXIMUM MAXIMUM
- ----------------------- ------------------ ------------------ ------------------- ---------------------
Net Income $2,948,027.00 $3,554,401.00 $8,080,000.00 $14,582,428.00
- ----------------------- ------------------ ------------------ ------------------- ---------------------
</TABLE>
The following table sets forth the incremental annual award correlating
to the Threshold, Target and Maximum LTIP Net Income and values associated with
achieving such levels of cumulative net income:
22
<PAGE>
- ------------------------- ----------------------
LTIP THREE YEARS ENDING
DECEMBER 31, 2000
- ------------------------- ----------------------
THRESHOLD
- ------------------------- ----------------------
Cumulative Net Income $8,749,456.00
- ------------------------- ----------------------
LTIP Value $105,000
(% of Base Salary) (37.5%)
- ------------------------- ----------------------
TARGET
- ------------------------- ----------------------
Cumulative Net Income $11,665,943.00
- ------------------------- ----------------------
LTIP Value $210,000
(% of Base Salary) (75%)
- ------------------------- ----------------------
MAXIMUM
- ------------------------- ----------------------
Cumulative Net Income $14,582,428.00
- ------------------------- ----------------------
LTIP Value $315,000
(% of Base Salary) (112.5%)
- ------------------------- ----------------------
For purposes of administering the LTIP, during the 1998, 1999, 2000
three-year cycle, (i) all LTIP awards shall be paid in the form of restricted
shares; (ii) the number of restricted shares shall be determined by dividing the
dollar value of the Maximum LTIP Value, $315,000, by the closing price on
February 4, 1998, or the first trading day thereafter, on the New York Stock
Exchange (or such other market on which the Company's stock trades if it is not
listed on the New York Stock Exchange); (iii) the restricted shares, among other
things, shall be subject to a risk of forfeiture if and to the extent that the
performance criteria set forth in this Exhibit A with respect to the 1998, 1999,
2000 Cycle Years are not met; (iv) if actual cumulative net income for the
three-year period ending December 31, 2000, does not equal or exceed Threshold
LTIP Net Income for such period, all restricted shares shall be forfeited, and
no LTIP bonus will have been earned; (v) if actual cumulative net income for the
three year period ending December 31, 2000, exceeds Threshold LTIP Net Income,
but is less than Target LTIP Net Income, for such period, or exceeds Target LTIP
Net Income, but is less than Maximum LTIP Net Income, for such period, the
percentage of the LTIP restricted shares as to which the risk of forfeiture
shall lapse shall be proportionately increased above the Threshold bonus amount
or the Target Bonus amount, as the case may be; and (vi) if cumulative net
income for the three-year period ending December 31, 2000 equals or exceeds
Maximum LTIP Net Income for such period, the risk of forfeiture shall lapse as
to all restricted shares, but no additional shares will be issuable under the
LTIP regardless of the amount by which actual cumulative net income for the
three years ending December 31, 2000 exceeds such Maximum LTIP Net Income.
23
EXHIBIT 10.4
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT was made and entered into on the 3rd day of
November, 1997, effective for all purposes as of January 05, 1998, and is now
amended and restated effective as of September 18, 1998, by and between ECHELON
INTERNATIONAL CORPORATION, a Florida corporation (the "Company"), and JULIO A.
MAGGI, residing at 659 Randy Lane, Winter Park, FL 32789 (the "Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM
Subject to the provisions for termination as hereinafter provided, the
term of employment under this Agreement shall begin as of January 05, 1998 and
shall continue through December 31, 2000 (the "Employment Term"), provided,
however, that this Employment Agreement shall thereafter automatically be
renewed for successive one year terms of employment unless either party gives
the other written notice of termination at least one hundred twenty (120) days
prior to the end of any such term.
3. COMPENSATION
(a) BASE SALARY. Effective as of the Employment Date, the Company shall
pay to the Executive as basic compensation for all services rendered by the
Executive during the term of this Agreement a basic annualized salary of
$150,000 per year, or such other sum in excess of that amount as the parties may
agree on from time to time or as provided in the next sentence (as in effect
from time to time, the "Base Salary"), payable monthly or in other more frequent
installments, as determined by the Company. The Board of Directors of the
Company (the "Board of Directors") shall have no authority to reduce the
Executive's Base Salary in effect from time to time. In addition, the Board of
Directors, in its discretion, may award a bonus or bonuses to the Executive in
addition to the bonuses provided for in Section 3(b).
(b) BONUSES. In addition to the Base Salary to be paid pursuant to
Section 3(a), for and after the close of each fiscal year of the Company ending
on December 31, 1998, 1999 and 2000, provided that the Executive is then
employed by the Company under this Agreement, the
1
<PAGE>
Company shall pay as incentive compensation the Management Incentive
Compensation Plan ("MICP") bonuses, to the extent earned, specified on Exhibit A
to this Agreement. For each fiscal year ending after December 31, 2000, provided
the Executive continues to be employed by the Company under this Agreement, the
Executive shall be eligible for incentive compensation annual bonus plan(s)
adopted by the Board of Directors of the Company from time to time in accordance
with the terms of such plans.
(c) CERTAIN PLANS; INITIAL AND PERIODIC AWARDS. (i) The Company has
adopted certain incentive compensation plans including a long term incentive
plan (the "LTIP") providing for annual or other periodic awards to key employees
of, among other things, restricted stock and stock options (collectively, the
"Plans").
(ii) The Company hereby agrees to issue to the Executive under
the LTIP, effective upon the Employment Date, seven thousand five hundred
(7,500) shares of the Company's common stock (the "Restricted Stock"), which
Restricted Stock shall be subject to risk of forfeiture, which risk will lapse
as to one-fifth of the shares of the Restricted Stock on the first anniversary
of the Employment Date and as to an additional one-fifth of the Restricted Stock
on each of the then following four anniversaries of the Employment Date.
(iii) In addition to the Restricted Stock, the Company hereby
agrees to grant to the Executive under the LTIP, (1) effective as of the
Employment Date, options to purchase ten thousand (10,000) shares of the
Company's common stock (the "Initial Options"), and (2) for and after the close
of the fiscal year of the Company ending on December 31, 2000, provided that the
Executive is then employed by the Company under this Agreement, to the extent
earned, options to purchase a number of shares of the Company's common stock
specified on Exhibit A to this Agreement ("Periodic Options"). Initial Options
shall be exercisable as to one-fifth of the shares of common stock covered by
such options on the first anniversary of the date of grant thereof (the "Grant
Date") and as to an additional one-fifth of such shares on each of the then
following four anniversaries of the applicable Grant Date; Periodic Options
shall be immediately exercisable as to all shares of common stock covered
thereby. All Initial Options and Periodic Options shall expire ten (10) years
after the applicable Grant Date. The exercise price for each such option shall
be the closing price on the New York Stock Exchange (or such other market on
which the Company's stock trades if it is not listed on the New York Stock
Exchange) on the applicable Grant Date or, if such Grant Date is not a trading
day, the first trading day thereafter.
(iv) Any and all risks of forfeiture shall lapse as to all of
the Restricted Stock and the Initial Options shall be fully vested and shall be
exercisable as to all of the shares of common stock covered by the Initial
Options upon (i) the death of the Executive or termination of employment upon
the "Permanent Disability" (as that term is defined in Section 7(b)(ii) of this
Agreement) of the Executive, (ii) the termination of employment of the Executive
by the Company "Without Good Cause" (as that term is defined in Section 8(b)(iv)
of this Agreement) or (iii) the occurrence of a "Change in Control" (as that
term is defined in Section 8(d)(i) of this Agreement). Except as provided in the
preceding sentence, elsewhere in this Agreement, in an applicable Plan or, as to
any stock option, in the applicable certificate or award agreement therefor,
upon termination of the Executive's employment with the Company, any shares of
2
<PAGE>
Restricted Stock as to which risk of forfeiture shall not have lapsed shall be
forfeited to the Company and cancelled, and the Initial Options, but only if and
to the extent then not fully vested, shall not thereafter become further vested.
(d) REIMBURSEMENT. The Company shall reimburse the Executive, in
accordance with the Company's policies and practices for senior management, for
all reasonable expenses incurred by the Executive in the performance of the
Executive's duties under this Agreement, provided, however, that the Executive
must furnish to the Company an itemized account, satisfactory to the Company, in
substantiation of such expenditures.
(e) CERTAIN BENEFITS. Effective as of the effective date of this
Agreement, the Executive shall be entitled to such medical and other health
benefits as may be provided from to time to time to other senior officers of the
Company. Effective as of the Employment Date the Executive shall be entitled, in
addition to medical and other health benefits, to such fringe benefits
including, but not limited to, life insurance benefits and other benefits as may
be provided from time to time by the Company to other senior officers of the
Company. In addition, without restricting the foregoing, effective as of the
Employment Date the Company shall provide the Executive at the Company's sole
cost and expense with (i) a policy or policies of term life insurance (the
"Basic Life Insurance") providing, among other things, basic death benefits of
not less than two times the Base Salary in effect from time to time, (ii)
directors and officers liability insurance with coverage, terms and limits
suitable for a vice president of a New York Stock Exchange listed company
comparable in financial size and wherewithal to that of the Company, and (iii) a
monthly allowance of $500 cash to reimburse the Executive for the use and
maintenance of his automobile in furtherance of the business and affairs of the
Company, provided that the Executive shall at all times insure the Executive and
the Company in such amounts as may be reasonably requested by the Company
against claims for bodily injury, death and property damages occurring as a
result of its use. The Company shall use its reasonable best efforts to make
available to the Executive in connection with providing and paying for the Basic
Life Insurance the opportunity to purchase at the Executive's sole cost and
expense additional life insurance with a basic death benefit (the "Optional Life
Insurance") equal to two times the Executive's Base Salary in effect from time
to time (affording the Executive the opportunity to have basic death benefit
life insurance coverage equal to four times such Base Salary). The Company shall
use its reasonable best efforts to effect the transfer of the ownership to the
Executive of the policy or policies for the Basic Life Insurance and the
Optional Life Insurance, if any, upon the termination of the Executive's
employment by the Company. After the Executive's termination, payment of any
premiums would be the obligation of the Executive.
(f) OTHER INCENTIVE AND BENEFIT PLANS. Effective as of the Employment
Date the Executive shall be eligible to participate, in accordance with the
terms of such plans as they may be adopted, amended and administered from time
to time, in incentive, bonus, benefit or similar plans, including without
limitation, any stock option, bonus or other equity ownership plan, any short,
mid or long term incentive plan and any other bonus, pension or profit sharing
plans established by the Company from time to time.
3
<PAGE>
4. DUTIES
(a) GENERAL. The Executive is engaged as a Vice President of the
Company. In addition, at the request of the Board of Directors, the Executive
shall serve in any position or positions in any wholly owned subsidiary or
affiliate of the Company, without any additional compensation. The Executive
shall have such duties and hold such other offices as may from time to time be
reasonably assigned to him by the Board of Directors of the Company.
(b) INDEMNIFICATION. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless the Executive for all liabilities,
costs, expenses and damages arising out of or in connection with the Executive's
employment by or service to the Company under this Agreement. In furtherance of
this indemnity, the Company shall enter into an indemnification agreement, in
form and substance reasonably satisfactory to the Executive and the Company. In
addition, the indemnity provided hereunder shall extend to service by the
Executive as an officer or director, or service in a similar capacity, for any
civic, community or charitable organization, provided such service is undertaken
at the request of or with the knowledge and acquiescence of the Company. The
foregoing indemnification shall be in addition to any rights or benefits the
Executive may have under statute, the Bylaws or Articles of Incorporation of the
Company, under a policy of insurance, or otherwise.
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF
(a) EXTENT OF SERVICES. Effective as of the Employment Date, except
during customary vacation periods and periods of illness, the Executive shall
devote full-time energy and attention during regular business hours to the
benefit and business of the Company as may be reasonably necessary in performing
the Executive's duties pursuant to this Agreement.
(b) VACATIONS. Effective as of the Employment Date the Executive shall
be entitled to vacations with pay and to such personal and sick leave with pay
in accordance with the policy of the Company as may be established from time to
time by the Company and applied to other senior officers of the Company.
However, in no event shall the Executive be entitled to less than three weeks
vacation with pay per year during the first two years of employment and four
weeks of vacation with pay per year after two years of employment. Unused
vacation days may be carried over from one year to the next for a period of up
to two years. Any vacation days which remain unused on the second anniversary of
the end of the fiscal year to which they originally related shall expire and
shall thereafter no longer be useable by the Executive.
6. FACILITIES
The Company shall provide the Executive with a fully furnished office,
and the facilities of the Company shall be generally available to the Executive
in the performance of the Executive's duties pursuant to this Agreement, it
being understood and contemplated by the parties that all equipment, supplies
and office personnel required in the performance of the
4
<PAGE>
Executive's duties under this Agreement shall be supplied by and at the sole
expense of the Company.
7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
(a) DEATH. If after the Employment Date the Executive dies during the
term of the Executive's employment, the Company shall pay to the estate of the
Executive within 30 days after the date of death such Base Salary and any cash
bonus compensation earned pursuant to the provisions of any incentive
compensation plan then in effect but not yet paid, as would otherwise have been
payable to the Executive up to the end of the month in which the Executive's
death occurs. After receiving the payments provided in this Section 7(a) the
Executive and the Executive's estate shall have no further rights under this
Agreement (other than those rights already accrued).
(b) DISABILITY. (i) During any period of disability, illness or
incapacity after the Employment Date and during the term of this Agreement which
renders the Executive temporarily unable to perform the services required under
this Agreement, the Executive shall receive the Base Salary payable under
Section 3(a) of this Agreement plus any cash bonus compensation earned pursuant
to the provisions of any incentive compensation plan then in effect but not yet
paid, less any cash benefits received by him under any disability insurance
carried by or provided by the Company. Upon the Executive's "Permanent
Disability" (as defined below),the Executive shall receive the Base Salary
payable under Section 3(a) of this Agreement plus any cash bonus compensation
earned pursuant to the provisions of any incentive compensation plan then in
effect but not yet paid, as would otherwise have been payable to the Executive
up to the end of the month in which the Executive's Permanent Disability occurs.
Upon "Permanent Disability" (as that term is defined in Section 7(b)(ii) below)
of the Executive, except as provided in this Section 7(b), all rights of the
Executive under this Agreement (other than rights already accrued) shall
terminate.
(ii) The term "Permanent Disability" as used in this Agreement
shall mean, in the event a disability insurance policy is maintained by the
Company covering the Executive at such time and is in full force and effect, the
definition of permanent disability set forth in such policy. In the event no
disability insurance policy is maintained at such time and in full force and
effect, "Permanent Disability" shall mean the inability of the Executive, as
determined by the Board of Directors of the Company, by reason of physical or
mental disability to perform the duties required of him under this Agreement for
a period of one hundred and eighty (180) days in any one-year period. Successive
periods of disability, illness or incapacity will be considered separate periods
unless the later period of disability, illness or incapacity is due to the same
or related cause and commences less than six months from the ending of the
previous period of disability. Upon such determination, the Board of Directors
may terminate the Executive's employment under this Agreement upon ten (10)
days' prior written notice. If any determination of the Board of Directors with
respect to permanent disability is disputed by the Executive, the parties hereto
agree to abide by the decision of a panel of three physicians. The Executive and
Company shall each appoint one member, and the third member of the panel shall
be appointed
5
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by the other two members. The Executive agrees to make herself available for and
submit to examinations by such physicians as may be directed by the Company.
Failure to submit to any such examination shall constitute a breach of a
material part of this Agreement.
8. OTHER TERMINATIONS
(a) BY THE EXECUTIVE. (i) The Executive may terminate the Executive's
employment hereunder upon giving at least ninety (90) days' prior written
notice. In addition, the Executive shall have the right to terminate the
Executive's employment hereunder on the conditions and at the times provided for
in Section 8(d) of this Agreement.
(ii) If the Executive gives notice pursuant to Section 8(a)(i)
above, the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing.
In any such event, the Executive shall be entitled to receive only the Base
Salary not yet paid, as would otherwise have been payable to the Executive up to
the end of the month specified as the month of termination in the termination
notice. In the event the Executive gives notice pursuant to Section 8(a)(i)
above but specifies a termination date in excess of ninety (90) days from the
date of such notice, the Company shall have the right (but not the obligation)
to accelerate the termination date to any date prior to the date specified in
the notice that is in excess of ninety (90) days from the date of the notice,
and the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing;
provided, however, that in any such event the Executive shall be entitled to
receive the Base Salary, as would otherwise have been payable to the Executive
up to the end of the month of the termination date properly selected by the
Company. Upon receiving the payments provided for under this Section 8(a), all
rights of the Executive under this Agreement (other than rights already accrued)
shall terminate.
(b) TERMINATION FOR "GOOD CAUSE". (i) Except as otherwise provided in
this Agreement, the Company may terminate the employment of the Executive
hereunder only for "good cause," which shall mean: (A) the Executive's
conviction of either a felony involving moral turpitude or any crime in
connection with the Executive's employment by the Company which causes the
Company a substantial detriment, but specifically shall not include traffic
offenses; (B) the Executive's taking action as an executive officer of the
Company which, at the time such action is taken, the Executive knows or
reasonably should know to be contrary to the best interests of the Company; (C)
the Executive's willful failure to take actions not prohibited by law and
necessary to implement policies of the Company's Board of Directors which
actions the Board of Directors has communicated to him in writing, provided that
minutes of a Board of Directors meeting attended in its entirety by the
Executive shall be deemed communicated to the Executive; (D) the Executive's
continued failure to attend to the Executive's duties as an executive officer of
the Company; or (E) the Executive's use of or substantial dependence on
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alcohol or any narcotic drug or other controlled or illegal substance, if such
use or dependence renders the Executive unable to perform his duties under this
Agreement with or without reasonable accommodation, or any illegal use of such
substance during working hours or while performing services under this
Agreement. If any determination of substantial dependence is disputed by the
Executive, the parties hereto agree to abide by the decision of a panel of three
physicians appointed in the manner and subject to the same penalties for
noncompliance as specified in Section 7(b)(ii) of this Agreement.
(ii) Notwithstanding the foregoing, each of the foregoing
bases for termination specified in (A) through (E) of Subsection 8(b)(i) shall
constitute "Good Cause" only if (1) the Executive has been provided with written
notice of any assertion that there is a basis for termination for good cause
which notice shall specify in reasonable detail specific facts regarding any
such assertion and the Executive has been given a reasonable period of time
within which to remedy or cure the problem or complaint, (2) such notice is
provided to the Executive a reasonable time before the Board of Directors meets
to consider any possible termination for cause, (3) at or prior to the meeting
of the Board of Directors to consider the matters described in the written
notice, an opportunity is provided to the Executive and his counsel to be heard
by the Board of Directors with respect to the matters described in the written
notice, before it acts with respect to such matter, (4) any resolution or other
action by the Board of Directors with respect to any deliberation regarding or
decision to terminate the Executive for good cause is duly adopted by a vote of
a majority of the entire Board of Directors of the Company at a meeting of the
Board duly called and held and (5) the Executive is promptly provided with a
copy of the resolution or other corporate action taken with respect to such
termination.
(iii) If the employment of the Executive is terminated for
good cause under Section 8(b)(i) of this Agreement, the Company shall pay to the
Executive any Base Salary earned prior to the effective date of termination but
not yet paid and any cash bonus compensation earned pursuant to the provisions
of any incentive compensation plan then in effect but not paid to the Executive
prior to the effective date of such termination. Under such circumstances, such
payments shall be in full and complete discharge of any and all liabilities or
obligations of the Company to the Executive hereunder, and the Executive shall
be entitled to no further benefits under this Agreement (other than rights
already accrued).
(iv) Termination of the employment of the Executive other than
as expressly specified above in this Section 8(b) for good cause shall be deemed
to be a termination of employment "Without Good Cause."
(c) TERMINATION WITHOUT GOOD CAUSE. (i) Notwithstanding any other
provision of this Agreement, the Company shall have the right to terminate the
Executive's employment Without Good Cause pursuant to the provisions of this
Section 8(c). If after the Employment Date the Company shall terminate the
employment of the Executive Without Good Cause effective on a date earlier than
the termination date provided for in Section 2 (with the effective date of
termination as so identified by the Company being referred to herein as the
"Accelerated Termination Date"), the Executive, until the end of the term of
this Agreement then in effect as provided for in Section 2 or until the date
which is 24 months after the Accelerated Termination
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Date, whichever is greater, shall continue to receive, paid in the same monthly
or other periodic installments or at the otherwise same applicable times as in
effect prior to the Accelerated Termination Date, (1) the Base Salary, (2) an
amount equal to the target level of the annual MICP cash bonus payable to the
Executive as described on Exhibit A or any similar bonus or incentive plans or
programs then in effect (the "MICP Target Amount") in respect of the year during
which the Executive's employment terminates or, if greater, the MICP Target
Amount multiplied times the number of years (or fractions thereof) remaining in
the then unexpired term of this Agreement, and (3) any other cash or other bonus
compensation earned prior to the date of such termination pursuant to the terms
of all incentive compensation plans then in effect other than under the MICP as
described on Exhibit A or any similar bonus or incentive plans or programs then
in effect; provided that, notwithstanding such termination of employment, the
Executive's covenants set forth in Section 10 and Section 11 are intended to and
shall remain in full force and effect and provided further that in the event of
such termination, the Company shall have the right (but not the obligation) to
relieve the Executive, in whole or in part, of the Executive's duties under this
Agreement, or direct the Executive to no longer perform such duties, or direct
that the Executive no longer be required to report to work, or any combination
of the foregoing.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Executive as a result of a
termination by the Company of the Executive's employment Without Good Cause, the
payments and benefits paid and provided pursuant to this Section 8(c) shall be
deemed to constitute liquidated damages and not a penalty for the Company's
termination of the Executive's employment Without Good Cause.
(d) CHANGE IN CONTROL. (i) For purposes of this Agreement, a "Change in
Control" shall mean the first to occur of:
(1) a change in control of the Company of a nature that
is required, pursuant to the Securities Exchange Act
of 1934 (the "1934 Act"), to be reported in response
to Item 1(a) of a Current Report on Form 8-K or Item
6(e) of Schedule 14A under the 1934 Act (in each case
under this Agreement, references to provisions of the
1934 Act and the rules and regulations promulgated
thereunder being understood to refer to such law,
rules and regulations as the same are in effect on
November 1, 1996); or
(2) the acquisition of "Beneficial Ownership" (as defined
in Rule 13d-3 under the 1934 Act) of the Company's
securities comprising 35% or more of the combined
voting power of the Company's outstanding securities
by any "person" (as that term is used in Sections
13(d) and 14(d)(2) of the 1934 Act and the rules and
regulations promulgated thereunder, but not including
any trustee or fiduciary acting in that capacity for
an employee benefit plan sponsored by the Company)
and such person's "affiliates" and "associates" (as
those terms are defined under the 1934 Act), but
excluding any ownership by the Executive and his
affiliates and associates; or
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(3) the failure of the "Incumbent Directors" (as defined
below) to constitute at least a majority of all
directors of the Company (for these purposes,
"Incumbent Directors" means individuals who were the
directors of the Company on November 1, 1996, and,
after his or her election, any individual becoming a
director subsequent to November 1, 1996, whose
election, or nomination for election by the Company's
stockholders, is approved by a vote of at least
two-thirds of the directors then comprising the
Incumbent Directors, except that no individual shall
be considered an Incumbent Director who is not
recommended by management and whose initial
assumption of office as a director is in connection
with an actual or threatened "election contest"
relating to the "election of directors" of the
Company, as such terms are used in Rule 14a-11 of
Regulation 14A under the 1934 Act); or
(4) the closing of a sale of all or substantially all of
the assets of the Company;
(5) the Company's adoption of a plan of dissolution or
liquidation; or
(6) the closing of a merger or consolidation involving
the Company in which the Company is not the surviving
corporation or if, immediately following such merger
or consolidation, less than seventy-five percent
(75%) of the surviving corporation's outstanding
voting stock is held or is anticipated to be held by
persons who are stockholders of the Company
immediately prior to such merger or consolidation.
(ii) If after the Employment Date a Change in Control occurs,
the Executive shall have the right, exercisable for a period of one year
thereafter, to immediately terminate this Agreement by delivering a written
statement to that effect to the Company (irrespective of any termination or
purported termination of this Agreement or the Executive's employment hereunder
by the Company on or at any time following such Change in Control) and upon such
a termination the Executive shall have the right to receive and the Company
shall be obligated to pay or provide to or on behalf of the Executive: (A) as
soon as reasonably practicable, but in no event following thirty (30) days,
after the Executive delivers such statement to the Company, in cash a lump sum
payment in an amount equal to the sum of (1) the "Control Cash Payment" as that
term is defined in Section 8(d)(iii) of this Agreement; (2) two times the annual
Base Salary then in effect (or in effect immediately prior to the Change in
Control, if greater); (3) two times the maximum level of the annual cash bonus
payable to the Executive under the Company's Management Incentive Compensation
Plan as described on Exhibit A (or any similar bonus or incentive plans or
programs then in effect), applicable to the year in which employment terminates
or the immediately preceding year, if greater; and (4) the additional payments
necessary to discharge certain tax liabilities (the "Gross Up") as that term is
defined in Section 13 of this Agreement; and (B) for a twenty-four (24) month
period after the date on which the Executive delivers such statement to the
Company, the benefits described in Section 3(f) of this Agreement that were
provided to the Executive (and his spouse and dependents, if applicable)
immediately prior to the Change in Control (on terms, conditions and benefit
levels
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no less favorable than those in effect immediately prior to the Change in
Control), including, without limitation, medical and other health benefits,
Basic Life Insurance and Optional Life Insurance, contributions or benefits
under all applicable tax-qualified or non-qualified profit-sharing, savings,
pension, retirement or deferred compensation plans, and all benefits and amounts
forfeited by the Executive on account of termination of the Executive's
employment under any employee benefit plans or programs of the Company or its
affiliates, but excluding disability benefits and directors and officers
liability insurance coverage, at the Company's sole cost and expense; provided
that the Company may, in its discretion, pay the Executive a cash lump-sum equal
to the economic equivalent of any such benefits (for example, the total gross
premiums due for any insurance coverage for the applicable period) on an
after-tax basis, as determined by the Company in good faith and reasonably
acceptable to the Executive, in lieu of providing such benefits in kind (the sum
of the foregoing amounts and benefits described in clauses (A) and (B) above,
other than the Gross Up, being referred to as the "Change in Control Payment").
If the Executive fails to exercise his rights under this Section 8(d)(ii) within
one year following a Change in Control, such rights shall expire and be of no
further force or effect.
(iii) The "Control Cash Payment" shall be (A) $150,000, if the
first event to occur that constitutes a Change in Control occurs after December
31, 1997, but on or before December 31, 1998; (B) $300,000, if the first event
to occur that constitutes a Change in Control occurs after December 31, 1998,
but on or before December 31, 1999; or (C) $500,000, if the first event to occur
that constitutes a Change in Control occurs at any time after December 31, 1999.
(e) INTENTIONS REGARDING CERTAIN STOCK AND BENEFIT PLANS. Except as
otherwise provided herein, upon any termination of the Executive's employment
Without Good Cause or upon the occurrence of a Change in Control, it is the
intention of the parties that any and all vesting or performance requirements or
conditions affecting any outstanding restricted stock, performance stock, stock
option, stock appreciation right, bonus, award, right, grant or any other
incentive compensation under any of the Plans, under this Agreement, or
otherwise received, shall be deemed to be fully satisfied and any risk of
forfeiture with respect thereto shall be deemed to have lapsed.
(f) CERTAIN RIGHTS MUTUALLY EXCLUSIVE. The provisions of Section 8(c)
and Section 8(d) are mutually exclusive, provided, however, that if within one
year following commencement of an 8(c) payout there shall be a Change in Control
as defined in Section 8(d)(i), then the Executive shall be entitled to the
amounts and benefits payable to the Executive under Section 8(d)(ii) and
8(d)(iii) reduced by the amount that the Executive has received under Section
8(c) up to the date of the Change in Control. The triggering of the payment and
benefit requirements of Section 8(d) shall cause the provisions of Section 8(c)
to become inoperative.
9. DISCLOSURE
The Executive agrees that during the term of the Executive's employment
by the Company, and except as otherwise required by law, the Executive will
disclose and disclose only to the Company all ideas, methods, plans,
developments or improvements known by him which
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relate directly or indirectly to the business of the Company, whether acquired
by the Executive before or during the Executive's employment by the Company.
Nothing in this Section 9 shall be construed as requiring any such communication
where the idea, plan, method or development is lawfully protected from
disclosure as a trade secret of a third party or by any other lawful prohibition
against such communication. The covenants of this Section 9 shall not be
violated by ordinary and customary communications with reporters, bankers and
securities analysts and other members of the investment community.
10. CONFIDENTIALITY
Except as otherwise required by law, the Executive agrees to keep in
strict secrecy and confidence any and all information the Executive assimilates
or to which the Executive has access during the Executive's employment by the
Company and which has not been publicly disclosed and is not a matter of common
knowledge in the fields of work of the Company. The Executive agrees that both
during and after the term of the Executive's employment by the Company, the
Executive will not, without the prior written consent of the Company, disclose
any such confidential information to any third person, partnership, joint
venture, company, corporation or other organization. The foregoing covenants
shall not be breached to the extent that any such confidential information
becomes a matter of general knowledge other than through a breach by the
Executive of the Executive's obligations under this Section 10.
11. NONCOMPETITION AND NONSOLICITATION
(a) GENERAL. The Executive hereby acknowledges that, during and solely
as a result of the Executive's employment by the Company, the Executive has
received and shall continue to receive: (1) special training and education with
respect to the operations of the Company's real estate development and
management businesses and its leasing, lending and financing activities, and
other related matters, and (2) access to confidential information and business
and professional contacts. In consideration of the special and unique
opportunities afforded to the Executive by the Company as a result of the
Executive's employment, as outlined in the previous sentence, the Executive
hereby agrees to the restrictive covenants in this Section 11.
(b) NONCOMPETITION. During the term of the Executive's employment,
whether pursuant to this Agreement, any automatic or other renewal hereof or
otherwise, and, except as may be otherwise herein provided, for a period of two
(2) years after the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive shall not, directly
or indirectly, enter into, engage in, be employed by or consult with any
business which competes with the Company's real estate lending, leasing,
development or management businesses in Florida; provided, however, that, the
foregoing to the contrary notwithstanding, the restrictions of this Section
11(b) shall not apply following termination of the Executive's employment under
paragraph (c) or (d) of Section 8 of this Agreement in connection with a Change
in Control. Notwithstanding the foregoing, however, if the Executive's
employment by the Company terminates on account of the giving by the Company of
notice of termination
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pursuant to Section 2 of this Agreement, then (i) the two (2) year period
referred to in the preceding sentence shall be shortened to one (1) year, and
(ii) the geographic region referred to in the preceding sentence shall be
reduced from Florida to the greater Tampa Bay area (Hillsborough, Pinellas,
Pasco, Manatee and Sarasota Counties) and the greater Orlando area (Orange,
Seminole, Osceola and Lake Counties). The Executive shall not engage in such
prohibited activities, either as an individual, partner, officer, director,
stockholder, employee, advisor, independent contractor, joint venturer,
consultant, agent, or representative or salesman for any person, firm,
partnership, corporation or other entity so competing with the Company. The
restrictions of this Section 11 shall not be violated by (i) the ownership of no
more than 2% of the outstanding securities of any company whose stock is listed,
traded or quoted on a national securities exchange or any market maintained or
operated by the National Association of Securities Dealers, or (ii) other
outside business investments that do not in any manner conflict with the
services to be rendered by the Executive for the Company and that do not
diminish or detract from the Executive's ability to render the Executive's
required attention to the business of the Company.
(c) NONSOLICITATION. During the Executive's employment with the Company
and, except as may be otherwise herein provided, for a period of two (2) years
following the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive agrees the
Executive will refrain from and will not, directly or indirectly, as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, representative,
salesman or otherwise solicit any of the employees of the Company to terminate
their employment; provided, however, that, the foregoing to the contrary
notwithstanding, the restrictions of this Section 11(c) shall not apply
following termination of the Executive's employment under paragraph (c) or (d)
of Section 8 of this Agreement in connection with a Change in Control.
(d) TERM EXTENDED OR SUSPENDED. The period of time during which the
Executive is prohibited from engaging in certain business practices pursuant to
Sections 11(b) or (c) shall be extended by any length of time during which the
Executive is in breach of such covenants.
(e) ESSENTIAL ELEMENT. It is understood by and between the parties
hereto that the foregoing restrictive covenants set forth in Sections 11(a)
through (c) are essential elements of this Agreement, and that, but for the
agreement of the Executive to comply with such covenants, the Company would not
have agreed to enter into this Agreement. Such covenants by the Executive shall
be construed as agreements independent of any other provision in this Agreement.
The existence of any claim or cause of action of the Executive against the
Company, whether predicated on this Agreement, or otherwise, shall not
constitute a defense to the enforcement by the Company of such covenants.
(f) SEVERABILITY. It is agreed by the Company and Executive that if any
portion of the covenants set forth in this Section 11 are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographical area.
The Company and Executive agree that, if any court of competent jurisdiction
determines the specified time period or the specified geographical area
applicable to
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this Section 11 to be invalid, unreasonable, arbitrary or against public policy,
a lesser time period or geographical area which is determined to be reasonable,
non-arbitrary and not against public policy may be enforced against the
Executive. The Company and the Executive agree that the foregoing covenants are
appropriate and reasonable when considered in light of the nature and extent of
the business conducted by the Company.
12. SPECIFIC PERFORMANCE
The Executive agrees that damages at law will be an insufficient remedy
to the Company if the Executive violates the terms of Sections 9, 10 or 11 of
this Agreement and that the Company would suffer irreparable damage as a result
of such violation. Accordingly, it is agreed that the Company shall be entitled,
upon application to a court of competent jurisdiction, to obtain injunctive
relief to enforce the provisions of such Sections, which injunctive relief shall
be in addition to any other rights or remedies available to the Company. The
Executive agrees to pay to the Company all reasonable costs and expenses
incurred by the Company relating to the enforcement of the terms of Sections 9,
10 or 11 of this Agreement, including reasonable fees and reasonable
disbursements of counsel selected by the Company (during investigation and
before and at trial and in appellate proceedings).
13. PAYMENT OF EXCISE TAXES
(a) PAYMENT OF EXCISE TAXES. If the Executive is to receive any (1)
Change in Control Payment under Section 8(d), (2) any benefit or payment under
Section 7 as a result of or following the death or Permanent Disability of the
Executive, (3) any benefit or payment under Section 8(c) as a result of or
following any termination of employment hereunder Without Good Cause, or (4) any
benefit or payment under the Plans as a result of a Change in Control, following
the death or Permanent Disability of the Executive or following the termination
of employment hereunder Without Good Cause (such sections being referred to as
the "Covered Sections" and the benefits and payments to be received thereunder
being referred to as the "Covered Payments"), the Executive shall be entitled to
receive the amount described below to the extent applicable. If any Covered
Payment(s) under any of the Covered Sections or any other payments, awards,
benefits or distributions (or any acceleration or vesting of any such payment,
award, benefit or distribution) received or to be received by or on behalf of
the Executive in connection with a Change in Control or the Executive's
termination of employment (whether pursuant to the terms of this Agreement or
any other plan, program, arrangement or agreement with the Company or any other
person which effectuates a Change in Control, or any affiliate of the Company or
such other person) (collectively, the "Payments") are subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986 (as amended from
time to time, the "Code"), or any successor or similar provision of the Code
(the "Excise Tax"), the Company shall pay the Executive an additional amount
(the "Gross Up") such that the net amount retained by the Executive after
deduction of any Excise Tax on the Payments and any federal, state and local
income or employment tax, social security tax, excise tax, or any interest or
penalties imposed on any amounts paid under this Section 13 shall, be equal to
the Payments.
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(b) CERTAIN ADJUSTMENT PAYMENTS. For purposes of determining the Gross
Up, the Executive shall be deemed to pay the federal income tax at the highest
marginal rate of taxation (currently 39.6%) in the calendar year in which the
payment to which the Gross Up applies is to be made and state and local income
taxes (if any) at the highest marginal rate of taxation in the state and
locality of Executive's residence on the last day of such calendar year. The
determination of whether such Excise Tax is payable and the amount thereof shall
be made upon the opinion of tax counsel selected by the Company and reasonably
acceptable to the Executive ("Tax Counsel"), applying the rules set forth in the
next sentence. For purposes of determining whether any of the Covered Payments
will be subject to the Excise Tax and the amount of the Excise Tax: (1) all
Payments shall be treated as "parachute payments," within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments," within the meaning
of Section 280G(b)(1) of the Code, shall be treated as subject to the Excise
Tax, unless in the opinion of Tax Counsel such Payments (other than Covered
Payments), in whole or in part, do not constitute such parachute payments, or
such excess parachute payments, in whole or in part, represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount," within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;
and (2) the value of any non-cash or deferred payments or benefits shall be
determined by a "big five" (or equivalent) international accounting firm
selected by the Company and reasonably acceptable to the Executive in accordance
with the principles of Section 280G(d)(3) and (4) of the Code. The Gross Up, if
any, that is due under this Section 13 shall be paid to the Executive in cash in
a lump sum within thirty (30) days after the date on which the amount thereof
has been determined or is reasonably determinable by Tax Counsel, and, in any
event, not later than thirty (30) days following termination of the Executive's
employment under this Agreement, provided that if the amount of the Gross Up
cannot be finally determined at or before such time, the amount paid shall be
the estimated full amount of the Gross Up as reasonably determined by Tax
Counsel in good faith in accordance with the principles described in this
Section 13. The Executive shall be entitled to retain his own advisor to verify,
and consult with Tax Counsel in connection with, any determination or
computation related to the Excise Tax and/or Gross Up. If Tax Counsel's opinion
is not finally accepted by the Internal Revenue Service upon audit or otherwise,
or such an estimated Gross Up is paid, then appropriate adjustments shall be
computed (with additional Gross Up, if applicable) by such Tax Counsel based
upon the final amount of the Excise Tax so determined; any additional amount due
the Executive as a result of such adjustment shall be paid to the Executive by
the Company in cash in a lump sum within thirty (30) days of such computation
(including any interest or penalties owed by the Executive to the Federal
government by reason of any such underpayment), or any amount due the Company as
a result of such adjustment shall be paid to the Company by the Executive in
cash in a lump sum within thirty (30) days of such computation. All fees, costs
and expenses of Tax Counsel and any accounting firm or other advisor retained in
accordance with this Section 13 shall be borne solely by the Company.
14. MISCELLANEOUS
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(a) WAIVER OF BREACH. The waiver by either party to this Agreement of a
breach of any of the provisions of this Agreement by the other party shall not
be construed as a waiver of any subsequent breach by such other party.
(b) NO RIGHT TO CONTINUED EMPLOYMENT. Notwithstanding the fact that
certain provisions of this Agreement and/or Exhibit A reference a three year
cycle or provide for benefits upon a third year of employment, this Agreement
shall have a two year term with annual one year renewal terms subject to the
termination provisions contained herein.
(c) COMPLIANCE WITH OTHER AGREEMENTS. The Executive represents and
warrants that the execution of this Agreement by him and the Executive's
performance of the Executive's obligations hereunder will not conflict with,
result in the breach of any provision of or the termination of or constitute a
default under any Agreement to which the Executive is a party or by which the
Executive is or may be bound.
(d) BINDING EFFECT; ASSIGNMENT. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company. This Agreement is a personal
employment contract and the rights, obligations and interests of the Executive
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
(e) ENTIRE AGREEMENT. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof; provided, however, that nothing contained
in this Agreement shall be deemed to limit, reduce, waive or adversely affect
the benefits, payments and rights of participation to which the Executive and
his dependents and beneficiaries are entitled under the generally applicable
terms and conditions of any plan, policy, program or arrangement in which the
Executive or any such dependent or beneficiary participates during, and
following termination for any reason of, the Executive's employment under this
Agreement, or otherwise pursuant to applicable law. This Agreement may be
changed only by an agreement in writing signed by the party against whom any
waiver, change, amendment, modification or discharge is sought.
(f) NO DUTY TO MITIGATE. The Executive shall be under no duty to
mitigate any loss of income as result of the termination of his employment
hereunder and any payments due the Executive upon termination of employment
shall not be reduced in respect of any other employment compensation received by
the Executive following such termination.
(g) FLORIDA LAW. This Agreement shall be construed pursuant to and
governed by the substantive laws of the State of Florida (except that any
provision of Florida law shall not apply if the law of a state or jurisdiction
other than Florida would otherwise apply).
(h) VENUE; PROCESS. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in and only in the Circuit Court of the Sixth
Judicial Circuit of the State of Florida in and for Pinellas County (the
"Circuit Court") and
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the parties agree that jurisdiction shall not properly lie in any other
jurisdiction provided, however, if jurisdiction does not properly lie with the
Circuit Court, the parties agree that jurisdiction and venue shall properly lie
in and only in the United States District Court for the Middle District of
Florida, Tampa Division. The parties hereby waive any objections which they may
now or hereafter have based on venue and/or forum non conveniens and irrevocably
submit to the jurisdiction of any such court in any legal suit, action or
proceeding arising out of or relating to this Agreement. The parties further
agree that the mailing by certified or registered mail, return receipt
requested, of any process required by any such court shall constitute valid and
lawful service of process against them, without the necessity for service by any
other means provided by statute or rule of court.
(i) HEADINGS. The headings of the various sections in this Agreement
are inserted for the convenience of the parties and shall not affect the
meaning, construction or interpretation of this Agreement.
(j) SEVERABILITY. Any provision of this Agreement which is determined
by a court of competent jurisdiction to be prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, unenforceability or non-authorization without
invalidating the remaining provisions hereof or affecting the validity,
enforceability or legality of such provision in any other jurisdiction. In any
such case, such determination shall not affect any other provision of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect. If any provision or term of this Agreement is susceptible to
two or more constructions or interpretations, one or more of which would render
the provision or term void or unenforceable, the parties agree that a
construction or interpretation which renders the term or provision valid shall
be favored.
(k) DEDUCTION FOR TAX PURPOSES. The Company's obligations to make
payments under this Agreement are independent of whether any or all of such
payments are deductible expenses of the Company for federal income tax purposes.
(l) ENFORCEMENT. If, within 10 days after demand to comply with the
obligations of one of the parties to this Agreement served in writing on the
other, compliance or reasonable assurance of compliance is not forthcoming, and
the party demanding compliance engages the services of an attorney to enforce
rights under this Agreement, the prevailing party in any action shall be
entitled to recover all reasonable costs and expenses of enforcement (including
reasonable attorneys' fees and reasonable expenses during investigation, before
and at trial and in appellate proceedings). In addition, each of the parties
agrees to indemnify the other in respect of any and all claims, losses, costs,
liabilities and expenses, including reasonable fees and reasonable disbursements
of counsel (during investigation prior to initiation of litigation and at trial
and in appellate proceedings if litigation ensues), directly or indirectly
resulting from or arising out of a breach by the other party of their respective
obligations hereunder. The parties' costs of enforcing this Agreement shall
include prejudgment interest. Additionally, if any party incurs any
out-of-pocket expenses in connection with the enforcement of this Agreement, all
such amounts shall accrue interest at 18% per annum (or such lower rate as may
be required to avoid any limit imposed by applicable law) commencing 30 days
after any such expenses are
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incurred.
(m) NOTICES. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and three days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice shall be sent to:
To the Company: Echelon International Corporation
One Progress Plaza, Suite 1500
St. Petersburg, FL 33701
Attn: Chairman of the Board
Telecopy: (727) 803-8201
To the Executive at the Executive's address herein first above written,
or to such other address as either party may specify by written notice to the
other.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ATTEST: ECHELON INTERNATIONAL CORPORATION
(Corporate Seal)
By:
- -------------------------------- ------------------------------------------
Secretary Darryl A. LeClair, President
Date:
--------------------
Witnesses: EXECUTIVE
- -------------------------------- ---------------------------------------
As to Executive JULIO A. MAGGI
Date:
--------------------
EXHIBIT A
TO EMPLOYMENT AGREEMENT BETWEEN JULIO MAGGI
17
<PAGE>
AND ECHELON INTERNATIONAL CORPORATION,
AMENDED AND RESTATED EFFECTIVE AS OF SEPTEMBER 18, 1998
MICP
For and after the close of each fiscal year of the Company ending on
December 31, 1998, 1999 and 2000, provided that the Executive is then employed
by the Company under this Agreement, the MICP will provide for a cash bonus, if
and to the extent earned, based upon satisfaction by the Executive of specific
threshold, target and maximum individual goals ("Executive Performance Goals")
and upon achievement by the Company of specific threshold, target and maximum
net income goals ("Company Net Income Goals"). To the extent applicable,
Executive Performance Goals and Company Net Income Goals will be determined each
year by the Board of Directors or the Compensation Committee thereof and shall
be set forth in writing and attached as a schedule hereto no later than January
31 of the applicable fiscal year. For each such fiscal year, a portion of the
applicable MICP bonus amount shall be based upon satisfaction of the applicable
Executive Performance Goals (the "Executive-Based MICP Award") and a portion of
the applicable MICP bonus amount shall be based upon satisfaction of the
applicable Company Net Income Goals (the "Company-Based MICP Award"). All MICP
bonuses shall be paid only in cash.
For each fiscal year covered by the MICP as provided on this Exhibit A,
(i) if the threshold Executive Performance Goal is not achieved, no
Executive-Based MICP Award will be paid, (ii) if actual Executive performance
exceeds the threshold Executive Performance Goal but is less than the target
Executive Performance Goal, or if actual Executive performance exceeds the
target Executive Performance Goal but is less than the maximum Executive
Performance Goal, the Executive-Based MICP Award shall be proportionately
increased above the applicable threshold or target Executive-Based MICP Award,
as the case may be, and (iii) if actual Executive performance equals or exceeds
the maximum Executive Performance Goal, the maximum Executive-Based MICP Award
will be paid, but no additional Executive-Based MICP Award will be payable for
such fiscal year regardless of the amount by which actual Executive performance
for such fiscal year exceeds the maximum Executive Performance Goal.
For each fiscal year covered by the MICP as provided on this Exhibit A,
(i) if the threshold Company Net Income Goal is not achieved, no Company-Based
MICP Award will be paid, (ii) if actual net income exceeds the threshold Company
Net Income Goal but is less than the target Company Net Income Goal, or if
actual net income exceeds the target Company Net Income Goal but is less than
the maximum Company Net Income Goal, the Company-Based MICP Award shall be
proportionately increased above the applicable threshold or target Company-Based
MICP Award, as the case may be, and (iii) if actual net income equals or exceeds
the maximum Company Net Income Goal, the maximum Company-Based MICP Award will
be paid, but no additional Company-Based MICP Award will be payable for such
fiscal year regardless of the amount by which actual net income for such fiscal
year exceeds the maximum Company Net Income Goal.
For each fiscal year ending after December 31, 2000, provided the
Executive continues to
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be employed by the Company under this Agreement, the Executive shall be eligible
for incentive compensation annual cash bonus plan(s) adopted by the Board of
Directors of the Company and applicable to the Executive from time to time in
accordance with the terms of such plans, which may include annual cash bonuses
under the MICP as set forth on this Exhibit A.
The following table sets forth information regarding the MICP cash
bonuses to be paid for each year covered by the MICP as provided on this Exhibit
A, upon satisfaction of threshold, target and maximum levels of Executive
Performance Goals and Company Net Income Goals and subject to adjustment as
provided above, in each case expressed as a percentage of Base Salary in effect
as of the end of the applicable fiscal year.
- --------------------------------------------------------------------------------
PERFORMANCE INDIVIDUAL-BASED COMPANY-BASED MICP TOTAL
LEVEL MICP AWARD (60%) AWARD (40%) MICP AWARD (100%)
- --------------------------------------------------------------------------------
THRESHOLD 10.5% 7.0% 17.5%
- --------------------------------------------------------------------------------
TARGET 21.0% 14.0% 35.0%
- --------------------------------------------------------------------------------
MAXIMUM 31.5% 21.0% 52.5%
- --------------------------------------------------------------------------------
19
<PAGE>
LTIP
All LTIP awards of Periodic Options pursuant to this Agreement shall be
based on three year cycles (each an "LTIP Cycle"), with each LTIP Cycle ending
as of the last day of each fiscal year ending on or after December 31, 2000. For
each LTIP Cycle, any award of Periodic Options shall be determined based upon
the Executive's cumulative performance for the three fiscal years in such LTIP
Cycle ("Executive Cycle Performance") as compared to the sums of the threshold,
target and maximum Executive Performance Goals for the three fiscal years in
such LTIP Cycle ("Executive Cycle Goals"), and the Company's cumulative net
income for the three fiscal years in such LTIP Cycle ("Company Cycle Net
Income") as compared to the sum of the Company Net Income Goals for the three
fiscal years in such LTIP Cycle ("Company Cycle Net Income Goals").
For and after the close of the three fiscal year period ending December
31, 2000 (the "Initial LTIP Cycle"), provided that the Executive is then
employed by the Company under this Agreement, the LTIP will provide for an award
of Periodic Options, if and to the extent earned, based upon satisfaction by the
Executive of the Executive Performance Goals and upon achievement by the Company
of the Company Net Income Goals. For such period, a portion of the number of
shares covered by the applicable Periodic Options shall be based upon
satisfaction of the applicable Executive Performance Goals (the "Executive-Based
LTIP Award") and a portion of the number of shares covered by the applicable
Periodic Options shall be based upon satisfaction of the applicable Company Net
Income Goals (the "Company-Based LTIP Award").
For each LTIP Cycle covered by the LTIP as provided on this Exhibit A,
(i) if the threshold Executive Cycle Goal is not achieved, no Executive-Based
LTIP Award will be paid, (ii) if Executive Cycle Performance exceeds the
threshold Executive Cycle Goal but is less than the target Executive Cycle Goal,
or if actual Executive Cycle Performance exceeds the target Executive Cycle Goal
but is less than the maximum Executive Cycle Goal, the Executive-Based LTIP
Award shall be proportionately increased above the applicable threshold
Executive-Based LTIP Award or target Executive-Based LTIP Award, as the case may
be, and (iii) if actual Executive Cycle Performance equals or exceeds the
maximum Executive Performance Goal, the maximum Executive-Based LTIP Award will
be paid, but no additional amount of Executive-Based LTIP Award will be granted
under the LTIP regardless of the amount by which actual Executive Cycle
Performance for such LTIP Cycle exceeds the maximum Executive Cycle Goal.
For each LTIP Cycle covered by the LTIP as provided on this Exhibit A,
(i) if the threshold Company Cycle Net Income Goal is not achieved, no
Company-Based LTIP Award will be paid, (ii) if actual Company Cycle Net Income
exceeds the threshold Company Cycle Net Income Goal but is less than the target
Company Cycle Net Income Goal, or if actual Company Cycle Net Income exceeds the
target Company Cycle Net Income Goal but is less than the maximum Company Cycle
Net Income Goal, the Company-Based LTIP Award shall be proportionately increased
above the applicable threshold Company-Based LTIP Award or target Company-Based
LTIP Award, as the case may be, and (iii) if actual Company Cycle Net Income
equals or exceeds the maximum Company Cycle Net Income Goal, the maximum
Company-Based LTIP Award will be paid, but no additional amount of Company-Based
LTIP Award will
20
<PAGE>
be granted under the LTIP regardless of the amount by which actual Company Cycle
Net Income for such LTIP Cycle exceeds the maximum Company Cycle Net Income
Goal.
For fiscal years ending after December 31, 2000, provided the Executive
continues to be employed by the Company under this Agreement, the Executive
shall be eligible for incentive compensation periodic stock option plan(s)
adopted by the Board of Directors of the Company from time to time in accordance
with the terms of such plans, which may include annual grants of Periodic
Options under the LTIP as set forth on this Exhibit A.
The following tables set forth information regarding the threshold,
target and maximum levels of Executive Performance Goals and Company Net Income
Goals and the number of shares of the Company's common stock to be covered by
Periodic Options issued under the LTIP for each LTIP Cycle covered by the LTIP
for LTIP Cycles beyond the Initial LTIP Cycle as provided on this Exhibit A upon
satisfaction of such goals and subject to adjustment as provided above.
- --------------------------------------------------------------------------------
INITIAL LTIP CYCLE
THREE-YEAR CYCLE ENDING 12/31/2000
- --------------------------------------------------------------------------------
PERFORMANCE INDIVIDUAL-BASED COMPANY-BASED LTIP TOTAL
LEVEL LTIP AWARD (60%) AWARD (40%) LTIP AWARD (100%)
- --------------------------------------------------------------------------------
THRESHOLD 1,800 shares 1,200 shares 3,000 shares
- --------------------------------------------------------------------------------
TARGET 3,600 shares 2,400 shares 6,000 shares
- --------------------------------------------------------------------------------
MAXIMUM 5,400 shares 3,600 shares 9,000 shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUBSEQUENT LTIP CYCLES (IF APPLICABLE)
THREE-YEAR CYCLES ENDING EACH FISCAL YEAR 12/31/2001 AND THEREAFTER
- --------------------------------------------------------------------------------
PERFORMANCE INDIVIDUAL-BASED COMPANY-BASED LTIP TOTAL
LEVEL LTIP AWARD (60%) AWARD (40%) LTIP AWARD (100%)
- --------------------------------------------------------------------------------
THRESHOLD 600 shares 400 shares 1,000 shares
- --------------------------------------------------------------------------------
TARGET 1,200 shares 800 shares 2,000 shares
- --------------------------------------------------------------------------------
MAXIMUM 1,800 shares 1,200 shares 3,000 shares
- --------------------------------------------------------------------------------
21
EXHIBIT 10.5
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT was made and entered into on the 20th day of
November, 1996, effective for all purposes as of the date specified below in
Section 2, and is now amended and restated effective as of September 18, 1998,
by and between ECHELON INTERNATIONAL CORPORATION, a Florida corporation (the
"Company"), and LARRY J. NEWSOME, residing at 3863 40th Way South, St.
Petersburg, Florida 33711 (the "Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM
Subject to the provisions for termination as hereinafter provided, the
term of employment under this Agreement shall begin as of the completion of the
"Distribution" as that term is defined in the Company's Registration Statement
on Form 10, as amended (the "Distribution"), and shall continue through December
31, 1998, provided, however, that this Employment Agreement shall automatically
be renewed for successive one year terms unless either party gives the other
written notice of termination at least ninety (90) days prior to the end of any
such term.
3. COMPENSATION
(a) BASE SALARY. The Company shall pay to the Executive as basic
compensation for all services rendered by the Executive during the term of this
Agreement a basic annualized salary of $170,000 per year, or such other sum in
excess of that amount as the parties may agree on from time to time or as
provided in the next sentence (as in effect from time to time, the "Base
Salary"), payable monthly or in other more frequent installments, as determined
by the Company. The Board of Directors of the Company (the "Board of Directors")
shall have no authority to reduce the Executive's Base Salary in effect from
time to time. In addition, the Board of Directors, in its discretion, may award
a bonus or bonuses to the Executive in addition to the bonuses provided for in
Section 3(b).
(b) BONUSES. In addition to the Base Salary to be paid pursuant to
Section 3(a), for each of the Company's two fiscal years ending December 31,
1997 and December 31, 1998 during the term of this Agreement, and for the fiscal
year ending December 31, 1999 provided the Executive continues to be employed by
the Company under this Agreement, the Executive shall
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<PAGE>
be eligible to earn as incentive compensation the annual bonuses specified, to
the extent earned, on Exhibit A to this Agreement. For each fiscal year ending
after December 31, 1999, so long as the Employee remains employed by the
Company, the Executive shall be eligible to participate in incentive
compensation annual bonus plan(s) adopted by the Board of Directors of the
Company from time to time in accordance with the terms of such plans.
(c) CERTAIN PLANS AND INITIAL AWARD. (i) It is anticipated that the
Company will adopt certain incentive compensation plans including a long term
incentive plan (the "LTIP"), providing for annual or other periodic awards to
key employees, among other things, of restricted stock and a stock option plan
(the "ISO/NSO Plan"), providing for the annual or other periodic issuance of
options to purchase the Company's common stock. The LTIP and ISO/NSO are
referred to collectively in this Agreement as the "Plans." The Executive will be
given an opportunity to participate in the Plans, in accordance with and subject
to the terms of the Plans as they may be adopted, amended and administered from
time to time.
(ii) In addition to the incentive compensation referred to in
Section 3(c)(i), the Company hereby agrees to issue to the Executive under the
LTIP, effective immediately following the completion of the Distribution, that
number of shares of the Company's common stock (the "Initial Restricted Stock")
as will equal five-tenths of one percent (0.5%) of the shares of the Company's
common stock distributed in the Distribution, which Initial Restricted Stock
shall be subject to risk of forfeiture, which risk will lapse as to one-fourth
of the shares of the Initial Restricted Stock on January 31, 1998, and as to an
additional one-fourth of the Initial Restricted Stock on each of January 31,
1999, January 31, 2000 and January 31, 2001. Accordingly, as of January 31,
2001, all risks of forfeiture shall have lapsed as to all the Initial Restricted
Stock.
(iii) In addition to the incentive compensation referred to in
Section 3(c)(i) and the Initial Restricted Stock, the Company hereby agrees to
grant to the Executive under the LTIP, effective immediately following the
completion of the Distribution, options to purchase two thousand five hundred
(2,500) shares of the Company's common stock (the "Initial Options"), which
Initial Options shall be exercisable as to one-fourth of the shares of common
stock covered by the Initial Options on January 31, 1998, and as to an
additional one-fourth of such shares on each of January 31, 1999, January 31,
2000 and January 31, 2001. The exercise price for the Initial Options shall be
the closing price on the New York Stock Exchange (or such other market on which
the Company's stock trades if it is not listed on the New York Stock Exchange)
on the trading day which is the eighth month anniversary of the day of the
completion of the Distribution (the "Option Pricing Date"), or if the Option
Pricing Date is not a trading day, the first trading day thereafter.
(iv) Any and all risks of forfeiture shall lapse as to all of
the Initial Restricted Stock and the Initial Options shall be fully vested and
shall be exercisable as to all of the shares of common stock covered by the
Initial Options upon (i) the death of the Executive or termination of employment
upon the "Permanent Disability" (as that term is defined in Section 7(b)(ii) of
this Agreement) of the Executive, (ii) the termination of employment of the
Executive by the Company "Without Good Cause" (as that term is defined in
Section 8(b)(iv) of this Agreement) or (iii) the occurrence of a "Change in
Control" (as that term is defined in Section 8(d)(i) of this Agreement).
(d) REIMBURSEMENT. The Company shall reimburse the Executive, in
accordance with the
2
<PAGE>
Company's policies and practices for senior management, for all reasonable
expenses incurred by the Executive in the performance of the Executive's duties
under this Agreement, provided, however, that the Executive must furnish to the
Company an itemized account, satisfactory to the Company, in substantiation of
such expenditures.
(e) CERTAIN BENEFITS. The Executive shall be entitled to such fringe
benefits including, but not limited to, medical and other insurance benefits as
may be provided from time to time by the Company to other senior officers of the
Company. In addition, without restricting the foregoing, the Company shall
provide the Executive at the Company's sole cost and expense with (i) a policy
or policies of term life insurance (the "Basic Life Insurance") providing, among
other things, basic death benefits of not less than two times the Base Salary in
effect from time to time, (ii) directors and officers liability insurance with
coverage, terms and limits suitable for a chief financial officer of a New York
Stock Exchange listed company comparable in financial size and wherewithal to
that of the Company and (iii) a monthly allowance of $500 cash to reimburse the
Executive for the use and maintenance of his automobile in furtherance of the
business and affairs of the Company, provided that the Executive shall at all
times insure the Executive and the Company in such amounts as may be reasonably
requested by the Company against claims for bodily injury, death and property
damages occurring as a result of its use. The Company shall use its reasonable
best efforts to make available to the Executive in connection with providing and
paying for the Basic Life Insurance the opportunity to purchase at the
Executive's sole cost and expense additional life insurance with a basic death
benefit (the "Optional Life Insurance") equal to two times the Executive's Base
Salary in effect from time to time (affording the Executive the opportunity to
have basic death benefit life insurance coverage equal to four times such Base
Salary). The Company shall use its reasonable best efforts to effect the
transfer of the ownership to the Executive of the policy or policies for the
Basic Life Insurance and the Optional Life Insurance, if any, upon the
termination of the Executive's employment by the Company. After the Executive's
termination, payment of any premiums would be the obligation of the Executive.
(f) OTHER INCENTIVE AND BENEFIT PLANS. The Executive shall be eligible
to participate, in accordance with the terms of such plans as they may be
adopted, amended and administered from time to time, in incentive, bonus,
benefit or similar plans, including without limitation, any stock option, bonus
or other equity ownership plan, any short, mid or long term incentive plan and
any other bonus, pension or profit sharing plans established by the Company from
time to time.
4. DUTIES
(a) GENERAL. The Executive is engaged as the Chief Financial Officer
and a Senior Vice President of the Company. In addition, at the request of the
Board of Directors, the Executive shall serve in any position or positions in
any wholly owned subsidiary or affiliate of the Company, without any additional
compensation. The Executive shall have such duties and hold such other offices
as may from time to time be reasonably assigned to him by the Board of Directors
of the Company.
(b) INDEMNIFICATION. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless the Executive for all liabilities,
costs, expenses and damages arising out of or in connection with the Executive's
service to the Company under this Agreement. In
3
<PAGE>
furtherance of this indemnity, the Company shall enter into an indemnification
agreement, in form and substance reasonably satisfactory to the Executive and
the Company. In addition, the indemnity provided hereunder shall extend to
service by the Executive as an officer or director, or service in a similar
capacity, for any civic, community or charitable organization, provided such
service is undertaken at the request of or with the knowledge and acquiescence
of the Company. The foregoing indemnification shall be in addition to any rights
or benefits the Executive may have under statute, the Bylaws or Articles of
Incorporation of the Company, under a policy of insurance, or otherwise.
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF
(a) EXTENT OF SERVICES. During the term of the Executive's employment
under this Agreement, except during customary vacation periods and periods of
illness, the Executive shall devote full-time energy and attention during
regular business hours to the benefit and business of the Company as may be
reasonably necessary in performing the Executive's duties pursuant to this
Agreement.
(b) VACATIONS. The Executive shall be entitled to vacations with pay
and to such personal and sick leave with pay in accordance with the policy of
the Company as may be established from time to time by the Company and applied
to other senior officers of the Company. In no event shall the Executive be
entitled to fewer than four weeks' annual vacation. Unused vacation days may be
carried over from one year to the next for a period of up to two years. Any
vacation days which remain unused on the second anniversary of the end of the
fiscal year to which they originally related shall expire and shall thereafter
no longer be useable by the Executive.
6. FACILITIES
The Company shall provide the Executive with a fully furnished office,
and the facilities of the Company shall be generally available to the Executive
in the performance of the Executive's duties pursuant to this Agreement, it
being understood and contemplated by the parties that all equipment, supplies
and office personnel required in the performance of the Executive's duties under
this Agreement shall be supplied by and at the sole expense of the Company.
7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
(a) DEATH. If the Executive dies during the term of the Executive's
employment, the Company shall pay to the estate of the Executive within 30 days
after the date of death such Base Salary and any cash bonus compensation earned
pursuant to the provisions of any incentive compensation plan then in effect but
not yet paid, as would otherwise have been payable to the Executive up to the
end of the month in which the Executive's death occurs. After receiving the
payments provided in this Section 7(a) the Executive and the Executive's estate
shall have no further rights under this Agreement (other than those rights
already accrued).
(b) DISABILITY. (i) During any period of disability, illness or
incapacity during the term
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<PAGE>
of this Agreement which renders the Executive at least temporarily unable to
perform the services required under this Agreement, the Executive shall receive
the Base Salary payable under Section 3(a) of this Agreement plus any cash bonus
compensation earned pursuant to the provisions of any incentive compensation
plan then in effect but not yet paid, less any cash benefits received by him
under any disability insurance carried by or provided by the Company. Upon the
Executive's "Permanent Disability" (as defined below), which permanent
disability continues during the payment periods specified herein, the Company
shall pay to the Executive for the period of time specified below an amount (the
"Disability Payment") equal to the (i) sum of (A) the Base Salary, paid in the
same monthly or other periodic installments as in effect at the time of the
Executive's Permanent Disability plus (B) an amount equal to the target level of
the annual cash bonus payable to the Executive under the Company's Management
Incentive Compensation Plan as described on Exhibit A or any similar bonus or
incentive plans or programs then in effect (the "MICP Target Amount") in respect
of the fiscal year during which the Executive's Permanent Disability occurred,
which MICP Target Amount shall be paid in pro rata equal monthly installments
over the period of time specified below (ii) reduced by the amount of any
monthly payments under any policy of disability income insurance paid for by the
Company which payments are received during the time when any Disability Payment
is being made to the Executive following the Executive's Permanent Disability.
For so long as the Executive's Permanent Disability continues, the Disability
Payment shall be paid by the Company to the Executive at the same time or times
as would have been the case for payment of Base Salary over the unexpired term
of this Agreement if the Executive had not become permanently disabled and had
remained employed by the Company hereunder, but in no case shall such period
exceed 24 months. The Executive may be entitled to receive payments under any
disability income insurance which may be carried by or provided by the Company
from time to time. Upon "Permanent Disability" (as that term is defined in
Section 7(b)(ii) below) of the Executive, except as provided in this Section
7(b) all rights of the Executive under this Agreement (other than rights already
accrued) shall terminate.
(ii) The term "Permanent Disability" as used in this Agreement
shall mean, in the event a disability insurance policy is maintained by the
Company covering the Executive at such time and is in full force and effect, the
definition of permanent disability set forth in such policy. In the event no
disability insurance policy is maintained at such time and in full force and
effect, "Permanent Disability" shall mean the inability of the Executive, as
determined by the Board of Directors of the Company, by reason of physical or
mental disability to perform the duties required of him under this Agreement for
a period of one hundred and eighty (180) days in any one-year period. Successive
periods of disability, illness or incapacity will be considered separate periods
unless the later period of disability, illness or incapacity is due to the same
or related cause and commences less than six months from the ending of the
previous period of disability. Upon such determination, the Board of Directors
may terminate the Executive's employment under this Agreement upon ten (10)
days' prior written notice. If any determination of the Board of Directors with
respect to permanent disability is disputed by the Executive, the parties hereto
agree to abide by the decision of a panel of three physicians. The Executive and
Company shall each appoint one member, and the third member of the panel shall
be appointed by the other two members. The Executive agrees to make himself
available for and submit to examinations by such physicians as may be directed
by the Company. Failure to submit to any such examination shall constitute a
breach of a material part of this Agreement.
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8. OTHER TERMINATIONS
(a) BY THE EXECUTIVE. (i) The Executive may terminate the Executive's
employment hereunder upon giving at least ninety (90) days' prior written
notice. In addition, the Executive shall have the right to terminate the
Executive's employment hereunder on the conditions and at the times provided for
in Section 8(d) of this Agreement.
(ii) If the Executive gives notice pursuant to Section 8(a)(i)
above, the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing.
In any such event, the Executive shall be entitled to receive only the Base
Salary not yet paid, as would otherwise have been payable to the Executive up to
the end of the month specified as the month of termination in the termination
notice. In the event the Executive gives notice pursuant to Section 8(a)(i)
above but specifies a termination date in excess of ninety (90) days from the
date of such notice, the Company shall have the right (but not the obligation)
to accelerate the termination date to any date prior to the date specified in
the notice that is in excess of ninety (90) days from the date of the notice,
and the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing;
provided, however, that in any such event the Executive shall be entitled to
receive the Base Salary, as would otherwise have been payable to the Executive
up to the end of the month of the termination date properly selected by the
Company. Upon receiving the payments provided for under this Section 8(a), all
rights of the Executive under this Agreement (other than rights already accrued)
shall terminate.
(b) TERMINATION FOR "GOOD CAUSE". (i) Except as otherwise provided in
this Agreement, the Company may terminate the employment of the Executive
hereunder only for "good cause," which shall mean: (A) the Executive's
conviction of either a felony involving moral turpitude or any crime in
connection with the Executive's employment by the Company which causes the
Company a substantial detriment, but specifically shall not include traffic
offenses; (B) actions by the Executive as an executive officer of the Company
which clearly are contrary to the best interests of the Company; (C) the
Executive's willful failure to take actions permitted by law and necessary to
implement policies of the Company's Board of Directors which the Board of
Directors has communicated to him in writing, provided that minutes of a Board
of Directors meeting attended in its entirety by the Executive shall be deemed
communicated to the Executive; (D) the Executive's continued failure to attend
to the Executive's duties as an executive officer of the Company; or (E) the
Executive's use of or substantial dependence on alcohol or any narcotic drug or
other controlled or illegal substance, if such use or dependence renders the
Executive unable to perform his duties under this Agreement with or without
reasonable accommodation, or any illegal use of such substance during working
hours or while performing services under this Agreement. If any determination of
substantial dependence is disputed by the Executive, the parties hereto agree to
abide by the decision of a panel of three physicians appointed in the manner and
subject to the same penalties for noncompliance as specified in Section 7(b)(ii)
of this Agreement.
(ii) If the employment of the Executive is terminated for good
cause under
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Section 8(b)(i) of this Agreement, the Company shall pay to the Executive any
Base Salary earned prior to the effective date of termination but not yet paid
and any cash bonus compensation earned pursuant to the provisions of any
incentive compensation plan then in effect but not paid to the Executive prior
to the effective date of such termination. Under such circumstances, such
payments shall be in full and complete discharge of any and all liabilities or
obligations of the Company to the Executive hereunder, and the Executive shall
be entitled to no further benefits under this Agreement (other than rights
already accrued).
(iii) Notwithstanding the foregoing, each of the foregoing
bases for termination specified in (A) through (E) of Subsection 8(b)(i) shall
constitute "Good Cause" only if (1) the Executive has been provided with written
notice of any assertion that there is a basis for termination for good cause
which notice shall specify in reasonable detail specific facts regarding any
such assertion and the Executive has been given a reasonable period of time
within which to remedy or cure the problem or complaint, (2) such notice is
provided to the Executive a reasonable time before the Board of Directors meets
to consider any possible termination for cause, (3) at or prior to the meeting
of the Board of Directors to consider the matters described in the written
notice, an opportunity is provided to the Executive and his counsel to be heard
by the Board of Directors with respect to the matters described in the written
notice, before it acts with respect to such matter, (4) any resolution or other
action by the Board of Directors with respect to any deliberation regarding or
decision to terminate the Executive for good cause is duly adopted by a vote of
a majority of the entire Board of Directors of the Company at a meeting of the
Board duly called and held and (5) the Executive is promptly provided with a
copy of the resolution or other corporate action taken with respect to such
termination.
(iv) Termination of the employment of the Executive other than
as expressly specified above in this Section 8(b) for good cause shall be deemed
to be a termination of employment "Without Good Cause."
(c) TERMINATION WITHOUT GOOD CAUSE. (i) Notwithstanding any other
provision of this Agreement, the Company shall have the right to terminate the
Executive's employment Without Good Cause pursuant to the provisions of this
Section 8(c). If the Company shall terminate the employment of the Executive
Without Good Cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified by the Company being referred to herein as the "Accelerated
Termination Date"), the Executive, until the end of the term of this Agreement
then in effect as provided for in Section 2 or until the date which is 12 months
after the Accelerated Termination Date, whichever is greater, shall continue to
receive (1) the Base Salary, paid in the same monthly or other periodic
installments as in effect prior to the Accelerated Termination Date (2) an equal
monthly pro rata portion of an amount of cash equal to the MICP Target Amount
(as that term is defined in Section 7(b)(i)) in respect of the year during which
the Executive's employment terminates, or, if greater, the MICP Target Amount
multiplied times the number of years (or fractions thereof) remaining in the
then unexpired term of this Agreement plus (3) an equal monthly pro rata portion
of an amount of cash equal to the cash value of any bonus paid or to be paid to
the Executive in the form of performance shares or restricted stock under the
LTIP as described on Exhibit A or any similar bonus or incentive plans or
programs then in effect (valued, if applicable under the terms of such plans or
programs, at the greater of the closing price on the New York Stock Exchange, or
other such market on which the Company's stock trades if it is not listed on the
New York Stock Exchange, on the first trading day of the plan or program cycle
or the Accelerated Termination Date, or if the Accelerated Termination Date is
not a trading day, on the first trading day
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thereafter) in respect of the then-current three year cycles of such plans or
programs or such other cycle as is then in effect, calculated as if the
then-current cycles were completed and the target levels attained (the "LTIP
Target Amount"), which cash payment shall be in lieu and in full satisfaction
any rights under the LTIP in respect of such stock or shares as described in
Exhibit A or any similar bonus or incentive plans or programs in effect at the
time of such payment (all of which stock or shares shall be cancelled upon such
payment and receipt); provided however, if the Accelerated Termination Date is
prior to January 1, 1998, the amount of cash payable to the Executive under the
LTIP shall be $204,000 and (4) any other cash or other bonus compensation earned
prior to the date of such termination pursuant to the terms of all incentive
compensation plans then in effect other than the Company's Management Incentive
Compensation Plan as described on Exhibit A or any similar bonus on incentive
plans or programs then in effect; provided that, notwithstanding such
termination of employment, the Executive's covenants set forth in Section 10 and
Section 11 are intended to and shall remain in full force and effect and
provided further that in the event of such termination, the Company shall have
the right (but not the obligation) to relieve the Executive, in whole or in
part, of the Executive's duties under this Agreement, or direct the Executive to
no longer perform such duties, or direct that the Executive no longer be
required to report to work, or any combination of the foregoing.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Executive as a result of a
termination by the Company of the Executive's employment Without Good Cause, the
payments and benefits paid and provided pursuant to this Section 8(c) shall be
deemed to constitute liquidated damages and not a penalty for the Company's
termination of the Executive's employment Without Good Cause.
(d) CHANGE IN CONTROL. (i) For purposes of this Agreement, a "Change in
Control" shall mean the first to occur of:
(1) a change in control of the Company of a nature that
is required, pursuant to the Securities Exchange Act
of 1934 (the "1934 Act"), to be reported in response
to Item 1(a) of a Current Report on Form 8-K or Item
6(e) of Schedule 14A under the 1934 Act (in each case
under this Agreement, references to provisions of the
1934 Act and the rules and regulations promulgated
thereunder being understood to refer to such law,
rules and regulations as the same are in effect on
November 1, 1996); or
(2) the acquisition of "Beneficial Ownership" (as defined
in Rule 13d-3 under the 1934 Act) of the Company's
securities comprising 35% or more of the combined
voting power of the Company's outstanding securities
by any "person" (as that term is used in Sections
13(d) and 14(d)(2) of the 1934 Act and the rules and
regulations promulgated thereunder, but not including
any trustee or fiduciary acting in that capacity for
an employee benefit plan sponsored by the Company)
and such person's "affiliates" and "associates" (as
those terms are defined under the 1934 Act), but
excluding any ownership by the Executive and his
affiliates and associates; or
(3) the failure of the "Incumbent Directors" (as defined
below) to constitute at least a majority of all
directors of the Company (for these purposes,
"Incumbent Directors" means individuals who were the
directors of the
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Company on November 1, 1996, and, after his or her
election, any individual becoming a director
subsequent to November 1, 1996, whose election, or
nomination for election by the Company's
stockholders, is approved by a vote of at least
two-thirds of the directors then comprising the
Incumbent Directors, except that no individual shall
be considered an Incumbent Director who is not
recommended by management and whose initial
assumption of office as a director is in connection
with an actual or threatened "election contest"
relating to the "election of directors" of the
Company, as such terms are used in Rule 14a-11 of
Regulation 14A under the 1934 Act); or
(4) the closing of a sale of all or substantially all of
the assets of the Company;
(5) the Company's adoption of a plan of dissolution or
liquidation; or
(6) the closing of a merger or consolidation involving
the Company in which the Company is not the surviving
corporation or if, immediately following such merger
or consolidation, less than seventy-five percent
(75%) of the surviving corporation's outstanding
voting stock is held or is anticipated to be held by
persons who are stockholders of the Company
immediately prior to such merger or consolidation.
(ii) If a Change in Control occurs, the Executive shall have
the right, exercisable for a period of one year thereafter, to immediately
terminate this Agreement by delivering a written statement to that effect to the
Company (irrespective of any termination or purported termination of this
Agreement or the Executive's employment hereunder by the Company on or at any
time following such Change in Control) and upon such a termination the Executive
shall have the right to receive and the Company shall be obligated to pay or
provide to or on behalf of the Executive: (A) as soon as reasonably practicable,
but in no event following thirty (30) days, after the Executive delivers such
statement to the Company, in cash a lump sum payment in an amount equal to the
sum of (1) two times the annual Base Salary then in effect (or in effect
immediately prior to the Change in Control, if greater); (2) two times the
maximum level of the annual cash bonus payable to the Executive under the
Company's Management Incentive Compensation Plan as described in Exhibit A (or
any similar bonus or incentive plans or programs then in effect), applicable to
the year in which employment terminates or the immediately preceing year, if
greater; (3) the cash value of the LTIP Target Amount (as that term is defined
in Section 8(c)), which cash payment shall be in lieu and in full satisfaction
any rights under the LTIP in respect of such stock or shares as described in
Exhibit A or any similar bonus or incentive plans or programs in effect at the
time of such payment (all of which stock or shares shall be cancelled upon such
payment and receipt), other than any outstanding options to purchase the
Company's common stock held by the Executive (which shall not be so cancelled);
and (4) the additional payments necessary to discharge certain tax liabilities
(the "Gross Up") as that term is defined in Section 13 of this Agreement; and
(B) for a twenty-four (24) month period after the date on which the Executive
delivers such statement to the Company, the benefits described in Section 3(f)
of this Agreement that were provided to the Executive (and his spouse and
dependents, if applicable) immediately prior to the Change in Control (on terms,
conditions and benefit levels no less favorable than those in effect immediately
prior to the Change in Control), including, without limitation, medical and
other health benefits, Basic Life Insurance and Optional Life Insurance,
contributions or benefits under all applicable tax-qualified or non-
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qualified profit-sharing, savings, pension, retirement or deferred compensation
plans, and all benefits and amounts forfeited by the Executive on account of
termination of the Executive's employment under any employee benefit plans or
programs of the Company or its affiliates, but excluding disability benefits and
directors and officers liability insurance coverage, at the Company's sole cost
and expense; provided that the Company may, in its discretion, pay the Executive
a cash lump-sum equal to the economic equivalent of any such benefits (for
example, the total gross premiums due for any insurance coverage for the
applicable period) on an after-tax basis, as determined by the Company in good
faith and reasonably acceptable to the Executive, in lieu of providing such
benefits in kind (the sum of the foregoing amounts and benefits described in
clauses (A) and (B) above, other than the Gross Up, being referred to as the
"Change in Control Payment"). If the Executive fails to exercise his rights
under this Section 8(d)(ii) within one year following a Change in Control, such
rights shall expire and be of no further force or effect.
(e) INTENTIONS REGARDING CERTAIN STOCK AND BENEFIT PLANS. Except as
otherwise provided herein, upon any termination of the Executive's employment
Without Good Cause or upon the occurrence of a Change in Control, it is the
intention of the parties that any and all vesting or performance requirements or
conditions affecting any outstanding restricted stock, performance stock, stock
option, stock appreciation right, bonus, award, right, grant or any other
incentive compensation under any of the Plans, under this Agreement, or
otherwise received, shall be deemed to be fully satisfied and any risk of
forfeiture with respect thereto shall be deemed to have lapsed.
(f) CERTAIN RIGHTS MUTUALLY EXCLUSIVE. The provisions of Section 8(c)
and Section 8(d) are mutually exclusive, provided, however, that if within one
year following commencement of an 8(c) payout there shall be a Change in Control
as defined in Section 8(d)(i), then the Executive shall be entitled to the
amounts and benefits payable to the Executive under Section 8(d)(ii) reduced by
the amount that the Executive has received under Section 8(c) up to the date of
the Change in Control. The triggering of the payment and benefit requirements of
Section 8(d) shall cause the provisions of Section 8(c) to become inoperative.
9. DISCLOSURE
The Executive agrees that during the term of the Executive's employment
by the Company, the Executive will disclose and disclose only to the Company all
ideas, methods, plans, developments or improvements known by him which relate
directly or indirectly to the business of the Company, whether acquired by the
Executive before or during the Executive's employment by the Company. Nothing in
this Section 9 shall be construed as requiring any such communication where the
idea, plan, method or development is lawfully protected from disclosure as a
trade secret of a third party or by any other lawful prohibition against such
communication. The covenants of this Section 9 shall not be violated by ordinary
and customary communications with reporters, bankers and securities analysts and
other members of the investment community.
10. CONFIDENTIALITY
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The Executive agrees to keep in strict secrecy and confidence any and
all information the Executive assimilates or to which the Executive has access
during the Executive's employment by the Company and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Company. The Executive agrees that both during and after the term of the
Executive's employment by the Company, the Executive will not, without the prior
written consent of the Company, disclose any such confidential information to
any third person, partnership, joint venture, company, corporation or other
organization. The foregoing covenants shall not be breached to the extent that
any such confidential information becomes a matter of general knowledge other
than through a breach by the Executive of the Executive's obligations under this
Section 10.
11. NONCOMPETITION AND NONSOLICITATION
(a) GENERAL. The Executive hereby acknowledges that, during and solely
as a result of the Executive's employment by the Company, the Executive has
received and shall continue to receive: (1) special training and education with
respect to the operations of the Company's real estate development and
management businesses and its leasing, lending and financing activities, and
other related matters, and (2) access to confidential information and business
and professional contacts. In consideration of the special and unique
opportunities afforded to the Executive by the Company as a result of the
Executive's employment, as outlined in the previous sentence, the Executive
hereby agrees to the restrictive covenants in this Section 11.
(b) NONCOMPETITION. During the term of the Executive's employment,
whether pursuant to this Agreement, any automatic or other renewal hereof or
otherwise, and, except as may be otherwise herein provided, for a period of two
(2) years after the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive shall not, directly
or indirectly, enter into, engage in, be employed by or consult with any
business which competes with the Company's real estate lending, leasing,
development or management businesses in Florida; provided, however, that, the
foregoing to the contrary notwithstanding, the restrictions of this Section
11(b) shall not apply following termination of the Executive's employment under
paragraph (c) or (d) of Section 8 of this Agreement in connection with a Change
in Control. The Executive shall not engage in such prohibited activities, either
as an individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, or representative or
salesman for any person, firm, partnership, corporation or other entity so
competing with the Company. The restrictions of this Section 11 shall not be
violated by (i) the ownership of no more than 2% of the outstanding securities
of any company whose stock is traded on a national securities exchange or is
quoted in the Automated Quotation System of the National Association of
Securities Dealers (NASDAQ), or (ii) other outside business investments that do
not in any manner conflict with the services to be rendered by the Executive for
the Company and that do not diminish or detract from the Executive's ability to
render the Executive's required attention to the business of the Company.
(c) NONSOLICITATION. During the Executive's employment with the Company
and, except as may be otherwise herein provided, for a period of two (2) years
following the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive agrees the
Executive will refrain from and will not, directly or indirectly, as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor,
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joint venturer, consultant, agent, representative, salesman or otherwise solicit
any of the employees of the Company to terminate their employment; provided,
however, that, the foregoing to the contrary notwithstanding, the restrictions
of this Section 11(c) shall not apply following termination of the Executive's
employment under paragraph (c) or (d) of Section 8 of this Agreement in
connection with a Change in Control.
(d) TERM EXTENDED OR SUSPENDED. The period of time during which the
Executive is prohibited from engaging in certain business practices pursuant to
Sections 11(b) or (c) shall be extended by any length of time during which the
Executive is in breach of such covenants.
(e) ESSENTIAL ELEMENT. It is understood by and between the parties
hereto that the foregoing restrictive covenants set forth in Sections 11(a)
through (c) are essential elements of this Agreement, and that, but for the
agreement of the Executive to comply with such covenants, the Company would not
have agreed to enter into this Agreement. Such covenants by the Executive shall
be construed as agreements independent of any other provision in this Agreement.
The existence of any claim or cause of action of the Executive against the
Company, whether predicated on this Agreement, or otherwise, shall not
constitute a defense to the enforcement by the Company of such covenants.
(f) SEVERABILITY. It is agreed by the Company and Executive that if any
portion of the covenants set forth in this Section 11 are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographical area.
The Company and Executive agree that, if any court of competent jurisdiction
determines the specified time period or the specified geographical area
applicable to this Section 11 to be invalid, unreasonable, arbitrary or against
public policy, a lesser time period or geographical area which is determined to
be reasonable, non-arbitrary and not against public policy may be enforced
against the Executive. The Company and the Executive agree that the foregoing
covenants are appropriate and reasonable when considered in light of the nature
and extent of the business conducted by the Company.
12. SPECIFIC PERFORMANCE
The Executive agrees that damages at law will be an insufficient remedy
to the Company if the Executive violates the terms of Sections 9, 10 or 11 of
this Agreement and that the Company would suffer irreparable damage as a result
of such violation. Accordingly, it is agreed that the Company shall be entitled,
upon application to a court of competent jurisdiction, to obtain injunctive
relief to enforce the provisions of such Sections, which injunctive relief shall
be in addition to any other rights or remedies available to the Company. The
Executive agrees to pay to the Company all reasonable costs and expenses
incurred by the Company relating to the enforcement of the terms of Sections 9,
10 or 11 of this Agreement, including reasonable fees and reasonable
disbursements of counsel selected by the Company (during investigation and
before and at trial and in appellate proceedings).
13. PAYMENT OF EXCISE TAXES
(a) PAYMENT OF EXCISE TAXES. If the Executive is to receive any (1)
Change in Control
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Payment under Section 8(d), (2) any benefit or payment under Section 7 as a
result of or following the death or Permanent Disability of the Executive, (3)
any benefit or payment under Section 8(c) as a result of or following any
termination of employment hereunder Without Good Cause, or (4) any benefit or
payment under the Plans as a result of a Change in Control, following the death
or Permanent Disability of the Executive or following the termination of
employment hereunder Without Good Cause (such sections being referred to as the
"Covered Sections" and the benefits and payments to be received thereunder being
referred to as the "Covered Payments"), the Executive shall be entitled to
receive the amount described below to the extent applicable. If any Covered
Payment(s) under any of the Covered Sections or any other payments, awards,
benefits or distributions (or any acceleration or vesting of any such payment,
award, benefit or distribution) received or to be received by or on behalf of
the Executive in connection with a Change in Control or the Executive's
termination of employment (whether pursuant to the terms of this Agreement or
any other plan, program, arrangement or agreement with the Company or any other
person which effectuates a Change in Control, or any affiliate of the Company or
such other person) (collectively, the "Payments") are subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986 (as amended from
time to time, the "Code"), or any successor or similar provision of the Code
(the "Excise Tax"), the Company shall pay the Executive an additional amount
(the "Gross Up") such that the net amount retained by the Executive after
deduction of any Excise Tax on the Payments and any federal, state and local
income or employment tax, social security tax, excise tax, or any interest or
penalties imposed on any amounts paid under this Section 13 shall, be equal to
the Payments.
(b) CERTAIN ADJUSTMENT PAYMENTS. For purposes of determining the Gross
Up, the Executive shall be deemed to pay the federal income tax at the highest
marginal rate of taxation (currently 39.6%) in the calendar year in which the
payment to which the Gross Up applies is to be made and state and local income
taxes (if any) at the highest marginal rate of taxation in the state and
locality of Executive's residence on the last day of such calendar year. The
determination of whether such Excise Tax is payable and the amount thereof shall
be made upon the opinion of tax counsel selected by the Company and reasonably
acceptable to the Executive ("Tax Counsel"), applying the rules set forth in the
next sentence. For purposes of determining whether any of the Covered Payments
will be subject to the Excise Tax and the amount of the Excise Tax: (1) all
Payments shall be treated as "parachute payments," within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments," within the meaning
of Section 280G(b)(1) of the Code, shall be treated as subject to the Excise
Tax, unless in the opinion of Tax Counsel such Payments (other than Covered
Payments), in whole or in part, do not constitute such parachute payments, or
such excess parachute payments, in whole or in part, represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount," within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;
and (2) the value of any non-cash or deferred payments or benefits shall be
determined by a "big five" (or equivalent) international accounting firm
selected by the Company and reasonably acceptable to the Executive in accordance
with the principles of Section 280G(d)(3) and (4) of the Code. The Gross Up, if
any, that is due under this Section 13 shall be paid to the Executive in cash in
a lump sum within thirty (30) days after the date on which the amount thereof
has been determined or is reasonably determinable by Tax Counsel, and, in any
event, not later than thirty (30) days following termination of the Executive's
employment under this Agreement, provided that if the amount of the Gross Up
cannot be finally determined at or before such time, the amount paid shall be
the estimated full amount of the Gross Up as reasonably determined by Tax
Counsel in good faith in accordance with the principles described in this
Section 13. The Executive shall be
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entitled to retain his own advisor to verify, and consult with Tax Counsel in
connection with, any determination or computation related to the Excise Tax
and/or Gross Up. If Tax Counsel's opinion is not finally accepted by the
Internal Revenue Service upon audit or otherwise, or such an estimated Gross Up
is paid, then appropriate adjustments shall be computed (with additional Gross
Up, if applicable) by such Tax Counsel based upon the final amount of the Excise
Tax so determined; any additional amount due the Executive as a result of such
adjustment shall be paid to the Executive by the Company in cash in a lump sum
within thirty (30) days of such computation (including any interest or penalties
owed by the Executive to the Federal government by reason of any such
underpayment), or any amount due the Company as a result of such adjustment
shall be paid to the Company by the Executive in cash in a lump sum within
thirty (30) days of such computation. All fees, costs and expenses of Tax
Counsel and any accounting firm or other advisor retained in accordance with
this Section 13 shall be borne solely by the Company.
14. MISCELLANEOUS
(a) WAIVER OF BREACH. The waiver by either party to this Agreement of a
breach of any of the provisions of this Agreement by the other party shall not
be construed as a waiver of any subsequent breach by such other party.
(b) NO RIGHT TO CONTINUED EMPLOYMENT. Notwithstanding the fact that
certain provisions of this Agreement and Exhibit A reference a three year cycle
or provide for benefits upon a third year of employment, this Agreement shall
have a two year term with annual one year renewal terms subject to the
termination provisions contained herein.
(c) COMPLIANCE WITH OTHER AGREEMENTS. The Executive represents and
warrants that the execution of this Agreement by him and the Executive's
performance of the Executive's obligations hereunder will not conflict with,
result in the breach of any provision of or the termination of or constitute a
default under any Agreement to which the Executive is a party or by which the
Executive is or may be bound.
(d) BINDING EFFECT; ASSIGNMENT. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company. This Agreement is a personal
employment contract and the rights, obligations and interests of the Executive
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
(e) ENTIRE AGREEMENT. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof; provided, however, that nothing contained
in this Agreement shall be deemed to limit, reduce, waive or adversely affect
the benefits, payments and rights of participation to which the Executive and
his dependents and beneficiaries are entitled under the generally applicable
terms and conditions of any plan, policy, program or arrangement in which the
Executive or any such dependent or beneficiary participates during, and
following termination for any reason of, the Executive's employment under this
Agreement, or otherwise pursuant to applicable law. This Agreement may be
changed only by an agreement in writing signed by the party against whom any
waiver, change, amendment, modification or discharge is sought.
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(f) HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
(g) NO DUTY TO MITIGATE. The Executive shall be under no duty to
mitigate any loss of income as result of the termination of his employment
hereunder and any payments due the Executive upon termination of employment
shall not be reduced in respect of any other employment compensation received by
the Executive following such termination.
(h) FLORIDA LAW. This Agreement shall be construed pursuant to and
governed by the substantive laws of the State of Florida (except that any
provision of Florida law shall not apply if the law of a state or jurisdiction
other than Florida would otherwise apply).
(i) VENUE; PROCESS. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in and only in the Circuit Court of the Sixth
Judicial Circuit of the State of Florida in and for Pinellas County (the
"Circuit Court") and the parties agree that jurisdiction shall not properly lie
in any other jurisdiction provided, however, if jurisdiction does not properly
lie with the Circuit Court, the parties agree that jurisdiction and venue shall
properly lie in and only in the United States District Court for the Middle
District of Florida, Tampa Division. The parties hereby waive any objections
which they may now or hereafter have based on venue and/or forum non conveniens
and irrevocably submit to the jurisdiction of any such court in any legal suit,
action or proceeding arising out of or relating to this Agreement. The parties
further agree that the mailing by certified or registered mail, return receipt
requested, of any process required by any such court shall constitute valid and
lawful service of process against them, without the necessity for service by any
other means provided by statute or rule of court.
(j) SEVERABILITY. Any provision of this Agreement which is determined
by a court of competent jurisdiction to be prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, unenforceability or non-authorization without
invalidating the remaining provisions hereof or affecting the validity,
enforceability or legality of such provision in any other jurisdiction. In any
such case, such determination shall not affect any other provision of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect. If any provision or term of this Agreement is susceptible to
two or more constructions or interpretations, one or more of which would render
the provision or term void or unenforceable, the parties agree that a
construction or interpretation which renders the term or provision valid shall
be favored.
(k) DEDUCTION FOR TAX PURPOSES. The Company's obligations to make
payments under this Agreement are independent of whether any or all of such
payments are deductible expenses of the Company for federal income tax purposes.
(l) ENFORCEMENT. If, within 10 days after demand to comply with the
obligations of one of the parties to this Agreement served in writing on the
other, compliance or reasonable assurance of compliance is not forthcoming, and
the party demanding compliance engages the services of an attorney to enforce
rights under this Agreement, the prevailing party in any action shall be
entitled to recover all reasonable costs and expenses of enforcement (including
reasonable attorneys' fees and reasonable expenses during investigation, before
and at trial and in appellate proceedings). In addition, each of the parties
agrees to indemnify the other in respect of
15
<PAGE>
any and all claims, losses, costs, liabilities and expenses, including
reasonable fees and reasonable disbursements of counsel (during investigation
prior to initiation of litigation and at trial and in appellate proceedings if
litigation ensues), directly or indirectly resulting from or arising out of a
breach by the other party of their respective obligations hereunder. The
parties' costs of enforcing this Agreement shall include prejudgment interest.
Additionally, if any party incurs any out-of-pocket expenses in connection with
the enforcement of this Agreement, all such amounts shall accrue interest at 18%
per annum (or such lower rate as may be required to avoid any limit imposed by
applicable law) commencing 30 days after any such expenses are incurred.
(m) NOTICES. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and three days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice shall be sent to:
To the Company: Echelon International Corporation
One Progress Plaza
St. Petersburg, FL 33701
Attn: Chairman of the Board
Telecopy: (727) 803-8201
To the Executive at the Executive's address herein first above written,
or to such other address as either party may specify by written notice to the
other.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ATTEST: ECHELON INTERNATIONAL CORPORATION
(Corporate Seal)
By:
- -------------------------------- -------------------------------------
Secretary Darryl A. LeClair, President
Date:
--------------------
Witnesses: EXECUTIVE
- -------------------------------- ----------------------------------------
As to Executive LARRY J. NEWSOME
Date:
--------------------
17
<PAGE>
EXHIBIT A
TO
EMPLOYMENT AGREEMENT BETWEEN LARRY J. NEWSOME AND
ECHELON INTERNATIONAL CORPORATION,
AMENDED AND RESTATED EFFECTIVE AS OF SEPTEMBER 18, 1998
The Company will establish a Management Incentive Compensation Plan ("MICP") and
Long Term Incentive Plan ("LTIP") for its senior management in which the
Executive will participate. During the first two full fiscal years of the
Company's operation following the completion of the Spinoff ending on December
31, 1997, and December 31, 1998, respectively, and thereafter, as approved by
the Board of Directors or the Compensation Committee thereof, while the
Executive continues to be employed by the Company under this Agreement (the
"Covered Years"), the MICP will provide for annual cash bonuses based upon the
Company's net income for each of the Covered Years. The LTIP will provide the
opportunity to earn restricted shares based upon the Company's cumulative
results of operation for three year cycles, beginning with the three year cycle
of Covered Years ending December 31, 1999 (the "Cycle Years") provided that the
Executive continues to be employed by the Company under this Agreement. The
Executive's participation in the MICP and the LTIP during the Covered Years and
the Cycle Years shall be based upon the criteria and shall include awards with
the values indicated in the tables set forth below and as more fully described
in this Exhibit A.
MICP
During each of the Covered Years, (i) all MICP bonuses shall be paid in
cash; (ii) if Threshold Net Income is not achieved, no MICP cash bonus will be
paid; (iii) if actual net income exceeds Threshold Net Income, but is less than
Target Net Income, or exceeds Target Net Income but is less than Maximum Net
Income, the percentage of the MICP bonus shall be proportionately increased
above the Threshold bonus amount or the Target Bonus amount, as the case may be,
and (iv) if actual net income equals or exceeds Maximum Net Income, the Maximum
MICP cash bonus will be paid, but no additional cash bonus will be payable under
the MICP regardless of the amount by which actual net income in that Covered
Year exceeds Maximum Net Income. The following table sets forth information
regarding the MICP Net Income Threshold, Target and Maximum and cash bonuses.
- --------------------------------------------------------------------------------
MICP 1997 1998 1999
- --------------------------------------------------------------------------------
THRESHOLD
- --------------------------------------------------------------------------------
Net Income $1,584,274 $1,768,816 $2,132,640
- --------------------------------------------------------------------------------
MICP Cash Bonus $29,750 $29,750 $29,750
(% of Base Salary) (17.5%) (17.5%) (17.5%)
- --------------------------------------------------------------------------------
TARGET
- --------------------------------------------------------------------------------
Net Income $2,112,366 $2,358,422 $2,843,521
- --------------------------------------------------------------------------------
MICP Cash Bonus $59,500 $59,500 $59,500
(% of Base Salary) (35%) (35%) (35%)
- --------------------------------------------------------------------------------
MAXIMUM
- --------------------------------------------------------------------------------
Net Income $2,640,457 $2,948,027 $3,554,401
- --------------------------------------------------------------------------------
MICP Cash Bonus $89,250 $89,250 $89,250
(% of Base Salary) (52.5%) (52.5)% (52.5)%
- --------------------------------------------------------------------------------
18
<PAGE>
LTIP
1997, 1998, 1999 CYCLE YEARS
The sum of each year's Threshold Net Income for the three 1997, 1998
and 1999 Cycle Years shall be referred to as the "Threshold LTIP Net Income";
the sum of each year's Target Net Income for the three such Cycle Years shall be
referred to as "Target LTIP Net Income"; and the sum of each year's Maximum Net
Income for the three such Cycle Years shall be referred to as "Maximum LTIP Net
Income," in each case, as set forth in the following tables:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
LTIP 1997 1998 1999 LTIP NET INCOME
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THRESHOLD THRESHOLD
- -----------------------------------------------------------------------------------------------
Net Income $1,584,274.00 $1,768,816.00 $2,132,640.00 $5,485,730.00
- -----------------------------------------------------------------------------------------------
TARGET TARGET
- -----------------------------------------------------------------------------------------------
Net Income $2,112,366.00 $2,358,422.00 $2,843,521.00 $7,314,309.00
- -----------------------------------------------------------------------------------------------
MAXIMUM MAXIMUM
- -----------------------------------------------------------------------------------------------
Net Income $2,640,457.00 $2,948,027.00 $3,554,401.00 $9,142,885.00
- -----------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth information regarding the Threshold,
Target and Maximum LTIP Net Income and values associated with achieving such
levels of cumulative net income:
----------------------------------------------------------
LTIP THREE YEARS ENDING
DECEMBER 31, 1999
----------------------------------------------------------
THRESHOLD
----------------------------------------------------------
Cumulative Net Income $5,485,730.00
----------------------------------------------------------
LTIP Value $102,000
(% of Base Salary) (20%)
----------------------------------------------------------
TARGET
----------------------------------------------------------
Cumulative Net Income $7,314,309.00
----------------------------------------------------------
LTIP Value $204,000
(% of Base Salary) (40%)
----------------------------------------------------------
MAXIMUM
----------------------------------------------------------
Cumulative Net Income $9,142,885.00
----------------------------------------------------------
LTIP Value $306,000
(% of Base Salary) (60%)
----------------------------------------------------------
19
<PAGE>
For purposes of administering the LTIP, during the 1997, 1998, 1999
three-year cycle, (i) all LTIP awards shall be paid in the form of restricted
shares; (ii) the number of restricted shares shall be determined by dividing the
dollar value of the Maximum LTIP Value, $306,000, by the closing price on
January 1, 1998, or the first trading day thereafter, on the New York Stock
Exchange (or such other market on which the Company's stock trades if it is not
listed on the New York Stock Exchange); (iii) the restricted shares, among other
things, shall be subject to a risk of forfeiture if and to the extent that the
performance criteria set forth in this Exhibit A with respect to the 1997, 1998
and 1999 Cycle Years are not met; (iv) if actual cumulative net income for the
three-year period ending December 31, 1999 does not equal or exceed Threshold
LTIP Net Income for such period, all restricted shares shall be forfeited, and
no LTIP bonus will have been earned; (v) if actual cumulative net income for the
three year period ending December 31, 1999 exceeds Threshold LTIP Net Income,
but is less than Target LTIP Net Income, for such period, or exceeds Target LTIP
Net Income, but is less than Maximum LTIP Net Income, for such period, the
percentage of the LTIP restricted shares as to which the risk of forfeiture
shall lapse shall be proportionately increased above the Threshold bonus amount
or the Target bonus amount, as the case may be; and (vi) if cumulative net
income for the three-year period ending December 31, 1999 equals or exceeds
Maximum LTIP Net Income for such period, the risk of forfeiture shall lapse as
to all restricted shares, but no additional restricted shares will be issuable
under the LTIP regardless of the amount by which actual cumulative net income
for the three years ending December 31, 1999 exceeds such Maximum LTIP Net
Income.
20
<PAGE>
1998, 1999, 2000 CYCLE YEARS
The sum of each year's Threshold Net Income for the three 1998, 1999
and 2000 Cycle Years shall be referred to as the "Threshold LTIP Net Income";
the sum of each year's Target Net Income for the three such Cycle Years shall be
referred to as "Target LTIP Net Income"; and the sum of each year's Maximum Net
Income for the three such Cycle Years shall be referred to as "Maximum LTIP Net
Income," in each case, as set forth in the following tables:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
LTIP 1998 1999 2000 LTIP NET INCOME
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THRESHOLD THRESHOLD
- -----------------------------------------------------------------------------------------------
Net Income $1,768,816.00 $2,132,640.00 $4,848,000.00 $8,749,456.00
- -----------------------------------------------------------------------------------------------
TARGET TARGET
- -----------------------------------------------------------------------------------------------
Net Income $2,358,422.00 $2,843,521.00 $6,464,000.00 $11,665,943.00
- -----------------------------------------------------------------------------------------------
MAXIMUM MAXIMUM
- -----------------------------------------------------------------------------------------------
Net Income $2,948,027.00 $3,554,401.00 $8,080,000.00 $14,582,428.00
- -----------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth the incremental annual award correlating
to the Threshold, Target and Maximum LTIP Net Income and values associated with
achieving such levels of cumulative net income:
----------------------------------------------------------
LTIP THREE YEARS ENDING
DECEMBER 31, 2000
----------------------------------------------------------
THRESHOLD
----------------------------------------------------------
Cumulative Net Income $8,749,456.00
----------------------------------------------------------
LTIP Value $34,000
(% of Base Salary) (20%)
----------------------------------------------------------
TARGET
----------------------------------------------------------
Cumulative Net Income $11,665,943.00
----------------------------------------------------------
LTIP Value $68,000
(% of Base Salary) (40%)
----------------------------------------------------------
MAXIMUM
----------------------------------------------------------
Cumulative Net Income $14,582,428.00
----------------------------------------------------------
LTIP Value $102,000
(% of Base Salary) (60%)
----------------------------------------------------------
For purposes of administering the LTIP, during the 1998, 1999, 2000
three-year cycle, (i) all LTIP awards shall be paid in the form of restricted
shares; (ii) the number of restricted shares
21
<PAGE>
shall be determined by dividing the dollar value of the Maximum LTIP Value,
$102,000, by the closing price on February 4, 1998, or the first trading day
thereafter, on the New York Stock Exchange (or such other market on which the
Company's stock trades if it is not listed on the New York Stock Exchange);
(iii) the restricted shares, among other things, shall be subject to a risk of
forfeiture if and to the extent that the performance criteria set forth in this
Exhibit A with respect to the 1998, 1999, 2000 Cycle Years are not met; (iv) if
actual cumulative net income for the three-year period ending December 31, 2000
does not equal or exceed Threshold LTIP Net Income for such period, all
restricted shares shall be forfeited, and no LTIP bonus will have been earned;
(v) if actual cumulative net income for the three year period ending December
31, 2000 exceeds Threshold LTIP Net Income, but is less than Target LTIP Net
Income, for such period, or exceeds Target LTIP Net Income, but is less than
Maximum LTIP Net Income, for such period, the percentage of the LTIP restricted
shares as to which the risk of forfeiture shall lapse shall be proportionately
increased above the Threshold bonus amount or the Target bonus amount, as the
case may be; and (vi) if cumulative net income for the three-year period ending
December 31, 2000 equals or exceeds Maximum LTIP Net Income for such period, the
risk of forfeiture shall lapse as to all restricted shares, but no additional
restricted shares will be issuable under the LTIP regardless of the amount by
which actual cumulative net income for the three years ending December 31, 2000
exceeds such Maximum LTIP Net Income.
22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ECHELON INTERNATIONAL FOR THE PERIOD ENDED SEPTEMBER 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 9,400
<SECURITIES> 22,200
<RECEIVABLES> 44,600
<ALLOWANCES> 0
<INVENTORY> 900
<CURRENT-ASSETS> 78,000
<PP&E> 204,000
<DEPRECIATION> 29,000
<TOTAL-ASSETS> 478,800
<CURRENT-LIABILITIES> 42,700
<BONDS> 85,700
0
0
<COMMON> 100
<OTHER-SE> 216,900
<TOTAL-LIABILITY-AND-EQUITY> 478,800
<SALES> 0
<TOTAL-REVENUES> 31,600
<CGS> 0
<TOTAL-COSTS> 19,600
<OTHER-EXPENSES> 6,000
<LOSS-PROVISION> (1,600)
<INTEREST-EXPENSE> 4,100
<INCOME-PRETAX> 7,600
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,600
<DISCONTINUED> 0
<EXTRAORDINARY> 800
<CHANGES> 0
<NET-INCOME> 8,400
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.22
</TABLE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE Cynthia L. Sanders
Manager of Financial Reporting
Echelon International Corporation
Phone: 727.803.8231
E-mail: [email protected]
-or-
Lesli R. Williams
Manager of Marketing & Corporate
Communications
Echelon International Corporation
Phone: 727.803.8210
E-mail: [email protected]
ECHELON INTERNATIONAL CORPORATION ANNOUNCES
OPEN-MARKET STOCK BUY BACK
St. Petersburg, Fla. - (October 8, 1998) -- Echelon International Corporation
(NYSE: EIN) announced today that its Board of Directors has authorized up to $15
million for the purchase of the Company's outstanding common stock, from time to
time in the open market, or in privately negotiated transactions, as market
conditions allow.
Darryl A. LeClair, Echelon's chairman, CEO and president said, "The Board
believes that the current market price for the Company's common stock is not
reflective of its true value, making this buy-back program an excellent
investment to build long-term shareholder value."
Echelon International Corporation is a real estate company involved in the
development, ownership and management of commercial and multifamily residential
real estate. The Company also owns and manages a portfolio of aircraft leases
along with aircraft and real estate loans. Echelon plans to gradually withdraw
from the aircraft and real estate lending business and focus on its core real
estate operations.
# # #
EXHIBIT 99.2
Susan Glatthorn Johnson
Senior Vice President
Echelon International Corporation
Phone: 727-803-8250
E-mail: [email protected]
Cynthia L. Sanders
Manager of Financial Reporting
Echelon International Corporation
Phone: 727-803-8231
FOR IMMEDIATE RELEASE E-mail: [email protected]
ECHELON INTERNATIONAL REPORTS THIRD-QUARTER RESULTS
ST. PETERSBURG, FL., November 4, 1998 - Echelon International Corporation (NYSE:
EIN), a real estate company which develops, owns and manages multi-family
residential and commercial real estate, today announced financial results for
the third quarter and nine months ended September 30, 1998.
Net income was $2.1 million, or 31 cents per diluted share for the quarter ended
September 30, 1998, a 62% increase compared to $1.3 million, or 19 cents per
diluted share for the same quarter a year ago. For the first nine months of 1998
net income was $8.4 million or $1.22 per diluted share, a 27% increase compared
to $6.6 million and 97 cents per diluted share for the same period a year ago.
Sales and revenues were $9.3 million and $31.6 million for the third quarter and
first nine months of 1998, respectively, compared to $10.6 million and $35.1
million for the same periods last year. The decrease in revenues is primarily
the result of a $4.1 million decrease in gain on sale of loans for the nine
months ended September 30, 1998, in comparison with the same period of the
previous year.
As of September 30, 1998, the Company's debt / equity ratio (including current
portion of long-term debt) was 31 / 69, with a cash position including
marketable securities, of $31.6 million.
Darryl A. LeClair, Echelon chairman, president and chief executive officer,
commented,
"We're excited about our solid success to date. We are currently under
construction on four multi-family residential communities and two
commercial properties. As previously communicated, we continuously
evaluate our strategies against short-term and long-term real estate and
capital market indicators.
-more-
<PAGE>
Echelon International
1998 Third Quarter Earnings Release
Page 2
For example, a cornerstone of our strategic plan is to build quality
multi-family projects not only for our own portfolio but for investors as
well. Given current real estate market conditions and the opportunity to
repurchase our own stock at an attractive discount, we have expedited our
strategic initiative to attract joint venture, merchant build and pre-sale
opportunities on some of our current pipeline projects. We have also
secured extensions on several land contracts to afford us the flexibility
and opportunity to react to current and future market conditions.
As mentioned above, Echelon's Board of Directors has authorized the
repurchase of up to $15.0 million of our outstanding common stock. The
Board believes that the current market price for the Company's common
stock is not reflective of its true value, making a buy-back program an
excellent investment to build long-term shareholder value.
We've also made further progress in the liquidation of our non-strategic
assets, as evidenced by the sale of two leveraged lease aircraft engines.
The sale of these aircraft engines and the termination of the leveraged
lease resulted in after-tax income of $.4 million in the third quarter. In
addition, during the third quarter Echelon also successfully negotiated a
modification in an agreement with the University of Florida Foundation,
Inc., which resulted in a $.8 million after-tax extraordinary gain to the
Company resulting from the settlement of a debt obligation."
Commenting on the quarter, Larry J. Newsome, Echelon senior vice president
and chief financial officer, stated,
"Our third quarter financial performance was in line with our expectations
and consistent with our goals of building our multi-family residential and
commercial real estate portfolio through the development and acquisition
of properties, liquidating non-strategic assets and managing our finance
lease portfolio to provide the greatest risk-adjusted rewards for the
Company.
In the area of development financing, even with the uncertainty in the
capital markets, we closed on several construction and permanent
financings during the third quarter."
-more-
<PAGE>
Echelon International
1998 Third Quarter Earnings Release
Page 3
Echelon International Corporation is a real estate company which develops, owns
and manages multi-family residential and commercial real estate. The Company
also owns and manages a portfolio of aircraft leases and aircraft and real
estate loans. Echelon's core growth strategy is to build its multi-family
residential real estate portfolio and maximize the value of and grow its
existing commercial real estate assets. The Company will continue to withdraw
from the real estate and aircraft lending business to focus on its core real
estate operations.
NOTE: CERTAIN STATEMENTS CONTAINED IN THIS PRESS RELEASE REGARDING OTHER THAN
HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS AND ARE MADE UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS, INCLUDING THOSE
CONCERNING ECHELON'S EXPECTED SOURCES AND USES OF FUNDS AND CAPITAL EXPENDITURES
AND ITS BUSINESS STRATEGY INCLUDING ITS PLANS TO GRADUALLY WITHDRAW FROM THE
AIRCRAFT AND REAL ESTATE LENDING BUSINESS AND FOCUS ON ITS CORE REAL ESTATE
OPERATION, INVOLVE RISKS AND UNCERTAINTIES. THE ACTUAL STRATEGIES AND THE TIMING
AND EXPECTED RESULTS OF SUCH MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR
IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE IDENTIFIED ON PAGE 13 OF THE
COMPANY'S ANNUAL REPORT.
-more-
<PAGE>
Echelon International
Third Quarter 1998 Earnings Release
Page 4
<TABLE>
<CAPTION>
ECHELON INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ----------------------
1998 1997 1998 1997
---- ---- ----- -----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Sales and revenues $9.3 $10.6 $31.6 $35.1
==== ===== ===== =====
Income before extraordinary item $1.3 $ 1.4 $ 7.6 $ 7.5
Extraordinary item, net of tax .8 (.1) .8 (.9)
---- ----- ----- -----
Net income $2.1 $ 1.3 $ 8.4 $ 6.6
==== ===== ===== =====
Diluted earnings per common share:
Income before extraordinary item $.19 $ .20 $1.10 $1.10
Extraordinary item, net of tax .12 (.01) .12 (.13)
---- ----- ----- -----
Net income $.31 $ .19 $1.22 $ .97
==== ===== ===== =====
Diluted weighted average common
shares outstanding 6.9 6.8 6.9 6.8
==== ===== ===== =====
</TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(UNAUDITED)
Cash and marketable securities $ 31.6 $ 49.8
Total current assets 78.0 93.6
Real estate, leases, loans and other investments 395.9 362.7
Total assets 478.8 460.5
Total current liabilities 42.7 37.5
Long-term debt 85.7 64.9
Deferred income taxes 133.0 145.8
Stockholders' equity 217.0 209.1
Total liabilities and stockholders' equity 478.8 460.5
# # #
