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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission File No. 0-21830
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Incorporated pursuant to the Laws of the State of Delaware
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Internal Revenue Service - Employer Identification No. 25-1672791
980 N. Michigan Avenue
Suite 1000
Chicago, IL 60611
(Address of principal executive offices)
(312) 280-8844
Registrant's telephone number, including area code
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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 [ ]
The total number of shares of the registrant's Common Stock, $.01 par value,
outstanding on August 10, 1999 was 10,255,628.
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I FINANCIAL INFORMATION......................................... 3
Item 1 Condensed Consolidated Balance Sheets as
of June 30, 1999, and December 31, 1998....................... 4-5
Condensed Consolidated Statements of Income for
the Three and Six Months Ended June 30, 1999 and 1998......... 6
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1999 and 1998............... 7-8
Notes to Condensed Consolidated Financial Statements.......... 9-14
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 15-20
PART II OTHER INFORMATION .......................................... 21
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
In the opinion of the registrant's management, the unaudited condensed
consolidated financial statements included in this filing on Form 10-Q reflect
all adjustments (which consist of normal recurring adjustments) which are
considered necessary for a fair presentation of financial information for the
periods presented.
3
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1999 AND DECEMBER 31, 1998
(Unaudited)
June 30, December 31,
(In thousands) 1999 1998
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents...................$ 43,848 $ 33,382
Accounts receivable, net.................... 72,066 55,550
Inventories................................. 38,884 29,566
Deferred income tax assets.................. 12,399 13,688
Prepaid expenses and other current assets... 6,336 2,643
Net assets of discontinued operations....... -- 37,555
------------- -------------
Total current assets...................... 173,533 172,384
Property, plant and equipment, net.......... 119,142 82,402
Deferred financing costs and other, net..... 5,998 8,809
Intangible assets, net...................... 256,484 229,408
------------- -------------
Total assets..............................$ 555,157 $ 493,003
============= =============
See accompanying notes to condensed consolidated financial statements.
4
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF JUNE 30, 1999 AND DECEMBER 31, 1998
(Unaudited)
<TABLE>
June 30, December 31,
(In thousands) 1999 1998
--------------- ---------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable......................................................... $ 39,513 $ 19,601
Accrued expenses and other payables...................................... 55,473 51,662
Accrued income taxes on discontinued operations.......................... 15,513 --
Current maturities of long-term debt and capital lease................... 1,924 9,039
--------------- ---------------
Total current liabilities............................................. 112,423 80,302
Long-term debt and capital lease, less current maturities................ 22,663 49,186
Senior subordinated notes................................................ 182,162 182,338
Deferred income tax liabilities.......................................... 30,390 34,571
Other long-term liabilities.............................................. 35,767 35,889
--------------- ---------------
270,982 301,984
Shareholders' Equity:
Preferred stock, par $.01, 20,000 shares
authorized, none outstanding........................................... -- --
Common stock, par $.01, 201,000 shares
authorized, 10,227 and 9,900 issued and outstanding
as of June 30, 1999 and December 31, 1998,
respectively........................................................... 102 99
Paid-in capital......................................................... 62,117 56,892
Unearned compensation................................................... (2,086) --
Retained earnings....................................................... 111,619 53,741
Employee receivables for stock purchases................................ -- (15)
--------------- ---------------
Total shareholders' equity............................................ 171,752 110,717
--------------- ---------------
Total liabilities and shareholders' equity............................. $ 555,157 $ 493,003
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
<TABLE>
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- ----------------------------
1999 1998 1999 1998
--------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 134,371 $ 109,014 $ 251,671 $ 222,831
Cost of sales 106,074 87,148 198,722 178,034
--------------- -------------- ------------- --------------
Gross profit.................................. 28,297 21,866 52,949 44,797
Selling, general and administrative
expenses...................................... 10,962 9,876 21,079 19,757
Amortization expense.......................... 1,914 1,698 3,607 3,391
Pension termination gain...................... -- (1,688) -- (1,688)
--------------- -------------- ------------- --------------
Operating income.............................. 15,421 11,980 28,263 23,337
Interest income............................... (524) (341) (654) (466)
Interest expense.............................. 7,332 7,180 14,293 14,595
--------------- -------------- ------------- --------------
Income before income taxes, extraordinary
items and discontinued operations............. 8,613 5,141 14,624 9,208
Provision for income taxes.................... 3,891 2,664 6,749 5,771
--------------- -------------- ------------- --------------
Net income before extraordinary items and
discontinued operations...................... 4,722 2,477 7,875 3,437
Extraordinary items, net of income taxes...... (2,206) (585) (2,505) (585)
Discontinued operations:
Income, net of income taxes................... 10,966 4,258 22,728 17,341
Gain on sale, net of income taxes............. 29,817 -- 29,817 --
--------------- -------------- ------------- --------------
Net income and comprehensive income........... $ 43,299 $ 6,150 $ 57,915 $ 20,193
=============== ============== ============= ==============
Basic earnings per share:
Income before extraordinary items and
discontinued operations...................... $ 0.47 $ 0.25 $ 0.79 $ 0.35
Extraordinary items........................... (0.22) (0.06) (0.25) (0.06)
Income from discontinued operations........... 4.06 0.44 5.26 1.78
--------------- -------------- ------------- --------------
Net income per share.......................... $ 4.31 $ 0.63 5.80 $ 2.07
=============== ============== ============= ==============
Basic weighted average common shares
outstanding.................................. 10,048 9,813 9,980 9,790
=============== ============== ============= ==============
Diluted earnings per share:
Income before extraordinary items and
discontinued operations...................... $ 0.46 $ 0.24 $ 0.77 $ 0.34
Extraordinary items........................... (0.22) (0.05) (0.25) (0.06)
Income from discontinued operations........... 3.99 0.42 5.18 1.72
--------------- -------------- ------------- --------------
Net income per share.......................... $ 4.23 $ 0.61 $ 5.70 $ 2.00
=============== ============== ============= ==============
Diluted weighted average equivalent shares
outstanding................................... 10,239 10,165 10,169 10,114
=============== ============== ============= ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
<TABLE>
Six Months Ended
June 30,
-------------------------------------
(In thousands) 1999 1998
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income .............................................................. $ 57,915 $ 20,193
Deduct income from discontinued operations............................... 22,728 17,341
--------------- ---------------
Income from continuing operations........................................ 35,187 2,852
Adjustments to reconcile net income to net cash provided by operating
activities:
Net gain on sale of discontinued operations.............................. (29,817) --
Depreciation............................................................. 6,511 5,517
Amortization - other..................................................... 4,218 3,951
Amortization - deferred financing costs.................................. 414 835
Deferred income taxes.................................................... (624) (585)
Pension termination gain................................................. -- (1,688)
Extraordinary items, net of income taxes................................. 2,505 585
Provisions for postretirement benefits................................... 783 793
Changes in operating assets and liabilities:
Accounts receivable, net................................................. (1,485) (5,100)
Inventories.............................................................. 415 3,108
Accounts payable......................................................... 7,231 (2,072)
Other assets and liabilities............................................. (9,858) 9,601
--------------- ---------------
Net cash provided by operating activities............................... 15,480 17,797
--------------- ---------------
INVESTING ACTIVITIES:
Proceeds from the sale of discontinued operations........................ 101,348 --
Cash paid for acquisitions, net of cash acquired......................... (76,288) --
Capital expenditures..................................................... (5,654) (3,849)
--------------- ---------------
Net cash provided by (used for) investing activities.................... 19,406 (3,849)
--------------- ---------------
See accompanying notes to condensed consolidated financial statements.
7
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
Six Months Ended
June 30,
-------------------------------------
(In thousands) 1999 1998
--------------- ---------------
FINANCING ACTIVITIES:
Proceeds from the issuance of long-term debt............................. $ 103,100 $ --
Payment of term loans and capital leases................................. (136,738) (16,760)
Payment of deferred financing costs...................................... (1,993) (8)
Other.................................................................... 342 106
--------------- ---------------
Net cash used for financing activities................................... (35,289) (16,662)
--------------- ---------------
Net decrease in cash and cash equivalents
from continuing operations............................................. (403) (2,714)
Net cash received from (paid to) discontinued operations................. 10,869 (2,906)
CASH AND CASH EQUIVALENTS,
beginning of period..................................................... 33,382 27,884
--------------- ---------------
CASH AND CASH EQUIVALENTS,
end of period........................................................... $ 43,848 $ 22,264
=============== ===============
SUPPLEMENTAL CASH FLOWS DISCLOSURE
Cash paid for interest $ 13,564 $ 15,659
Cash paid for income taxes $ 23,243 $ 11,817
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 1999
(Unaudited)
1. BASIS OF PRESENTATION
The financial statements presented herein and these notes are unaudited. Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Although the registrant believes that all
adjustments (which include only normal recurring adjustments) necessary for a
fair presentation have been made, interim periods are not necessarily indicative
of the results of operations for a full year. As such, these financial
statements should be read in conjunction with the financial statements and notes
thereto included by reference in the registrant's Form 10-K for the year ended
December 31, 1998 and Form 8-K dated August 12, 1999.
Effective June 14, 1999, the name of the Company was changed from "Johnstown
America Industries, Inc." to "Transportation Technologies Industries, Inc.", a
Delaware company (the "Company").
The condensed consolidated financial statements include the accounts of
Transportation Technologies Industries, Inc. and its wholly owned subsidiaries.
All significant intercompany transactions and accounts have been eliminated.
2. DISCONTINUED OPERATIONS
On June 3, 1999, the Company completed the sale of its freight car operations
comprised of three wholly owned subsidiaries - Johnstown America Corporation
("JAC"), Freight Car Services, Inc. ("FCS") and JAIX Leasing Company ("JAIX
Leasing) to Rabbit Hill Holdings, Inc. (the "Buyer"). The Company received
consideration consisting of approximately $101.3 million in cash, contingent
additional consideration of $20.0 million and a 20 percent equity interest in
the Buyer. In addition, the Buyer assumed substantially all of the liabilities
of the freight car operations, including $14.4 million of debt. The 20 percent
equity interest in the Buyer is comprised of common and preferred stock, some of
which is non-voting. Further, the Company's rights with respect to voting and
transferability of its equity interest are limited and, in particular, the
Company granted a proxy to vote its equity interest to another shareholder of
Buyer under certain circumstances. The sale resulted in an estimated pretax gain
of $46.8 million after consideration of estimated transaction costs of $4.2
million and a related pension curtailment loss of $0.3 million. The after-tax
gain on the disposition of the Railcar Business of $29.8 million was recorded in
the Company's results for the second quarter of 1999. Approximately $2.5 million
of additional gain was deferred due to the Company's continuing interest in the
Railcar Business. Proceeds from the
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$20.0 million contingent additional consideration will be recorded as a gain, if
and when collected. Also as a result of the sale, $80.0 million of senior bank
debt was paid subsequent to the disposition which resulted in the after-tax
write off of $0.5 million of unamortized deferred financing costs.
The accompanying consolidated financial statements have been recast to reflect
the Railcar Business as a discontinued operation. For historical business
reporting segment purposes, the Company's financial data related to its Railcar
Business was previously reported as the segment, "Freight Car."
Revenues of the Railcar Business in the three and six months ended June 30, 1999
were $134.5 million and $315.6 million, respectively, and were $129.2 million
and $246.6 million for the three and six months ended June 30, 1998,
respectively.
3. ACQUISITIONS
IMPERIAL GROUP ACQUISITION
April 29, 1999, the Company acquired the assets of Imperial Group, Inc.
(Imperial). Imperial is a leading Tier I and Tier II supplier of body and
chassis components for heavy-duty Class 8 truck manufacturers and transit bus
manufacturers. The purchase price for Imperial was approximately $60.1 million
consisting of $57.4 million in cash and 156,740 shares of the Company's common
stock. The acquisition was accounted for under the purchase method of
accounting. The acquisition is subject to a future working capital adjustment.
The purchase price is also subject to a contingent earn-out of up to $4.0
million, based on the operating results of Imperial's Washington plant for the
24 months ended April 2001. The Company also incurred transaction costs of $0.7
million and issued 36,500 shares of restricted stock to two Imperial employees
valued at $0.6 million, which vest ratably over three years if employment
continues.
EMI COMPANY ACQUISITION
Effective May 17, 1999, the Company acquired certain assets and liabilities of
EMI Company (EMI), an iron foundry and machining company located in Erie,
Pennsylvania. The Company paid $16.5 million in cash for property, plant and
equipment and $2.2 million for working capital. The acquisition was accounted
for under the purchase method of accounting.
10
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the Six Months Ended June 30, 1999
(Unaudited)
4. INVENTORIES
Inventories of the Company consist of the following (in thousands):
June 30, December 31,
1999 1998
--------------- ---------------
Raw materials and purchased
components $ 11,032 $ 8,575
Work-in-progress and finished goods 27,852 20,991
--------------- ---------------
$ 38,884 $ 29,566
=============== ===============
5. DEBT
Long-term debt of the Company consists of the following (in thousands):
June 30, December 31,
1999 1998
--------------- ---------------
Revolving loan $ -- $ --
Tranche A term loan 10,000 56,632
Tranche B term loan 10,000 --
--------------- ---------------
Total senior bank facilities 20,000 56,632
Industrial revenue bond 3,100 --
Capital lease 1,487 1,593
--------------- ---------------
Total debt 24,587 58,225
Less:
Current maturities 1,924 9,039
--------------- ---------------
Long-term debt $ 22,663 $ 49,186
=============== ===============
The Company entered into a credit facility (Senior Bank Facilities) on August
23, 1995, in conjunction with the acquisition of Truck Components Inc. (TCI) and
the related transactions. The revolving credit line portion of the Senior Bank
Facilities provided for up to $75 million of outstanding borrowings and letters
of credit, limited by the level of eligible accounts receivable and inventories.
11
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the Six Months Ended June 30, 1999
(Unaudited)
The Company used $20.0 million of cash from operations during the first quarter
of 1999 to prepay obligations under the Tranche B term loan. An extraordinary
non-cash after tax charge of $0.3 million was incurred from the write off of
unamortized deferred financing costs associated with this debt repayment.
NEW SENIOR BANK CREDIT FACILITY
In conjunction with the acquisition of Imperial, the Company on April 29, 1999,
entered into a new Senior Bank Credit Facility. The new facility is comprised of
a $50 million Term A Loan, a $50 million Term B Loan and an undrawn $75 million
Revolving Credit Facility. Proceeds were used to finance the Imperial
acquisition, to refinance the Company's then outstanding senior bank debt of
$36.6 million (resulting in an extraordinary non-cash after tax charge of $1.7
million from the write off of unamortized deferred financing costs), and for
working capital and other general corporate purposes.
At the Company's election, interest rates per annum on the Term A Loan and the
Revolving Credit Facility are fluctuating rates of interest measured by
reference to either (a) an adjusted London inter-bank offered rate (LIBOR) plus
a borrowing margin or (b) an alternate base rate (ABR) plus a borrowing margin.
Such borrowing margins range between 1.50% and 2.50% for LIBOR loans and between
0.50% and 1.50% for ABR loans, fluctuating within each range in 0.25% increments
based on the Company achieving certain financial results. Interest rates per
annum applicable to the Term B Loan are either (a) LIBOR plus a margin of 2.75%
or (b) ABR plus a margin of 1.75%. Additionally, various fees related to unused
commitments, letters of credit and administration of the facility are incurred
by the Company. Borrowings under the Senior Bank Credit Facility are guaranteed
by each of the Company's continuing subsidiaries (the Guarantor Subsidiaries)
and are secured by the assets and stock of the Company and its Guarantor
Subsidiaries. The Term A Loan and the Revolving Credit Facility mature on April
29, 2004 and the Term B Loan matures on April 29, 2005.
The new Senior Bank Credit Facility contains various financial covenants
including capital expenditure limitations, minimum leverage and interest
coverage ratios, and minimum net worth. The agreement also restricts the Company
from paying dividends and making other distributions in certain circumstances,
and limits the ability to repurchase common stock and prepay the Senior
Subordinated Notes.
In connection with the sale of the freight car operations, net proceeds were
used to pay down $40.0 million of the Term A Loan and $40.0 million of the Term
B Loan, resulting in an extraordinary non-cash after tax charge of $0.5 million
from the write off of unamortized deferred financing costs. As of June 30, 1999,
availability under the revolving credit line, after consideration of outstanding
letters of credit of $11.2 million, was $63.8 million and the weighted average
interest rate of all outstanding loans under the Senior Bank Credit Facility was
8.6%.
12
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the Six Months Ended June 30, 1999
(Unaudited)
INDUSTRIAL REVENUE BOND
On April 1 1999, the Company, through its wholly owned subsidiary, Bostrom
Seating, Inc., issued Industrial Revenue Bonds for $3.1 million which bear
interest at a variable rate (3.80% as of June 30, 1999) and can be redeemed by
the Company at any time. The bonds are secured by a letter of credit issued by
the Company. The bonds have no amortization and mature in 2014. The bonds are
also subject to a weekly "put" provision by the holders of the bonds. In the
event that any or all of the bonds are put to the Company under this provision,
the Company would either refinance such bonds with additional borrowings under
the new Revolving Credit Facility or use available cash on hand.
INTEREST RATE CONTRACTS
The Company has entered into an interest rate contract to fix a portion of the
cost of its variable rate bank debt. This contract limits the effect of market
fluctuations on the interest cost of floating rate debt. The notional principal
amounts outstanding on the interest rate contract covering the current period is
$25.0 million at a 6.14% fixed rate of interest plus the applicable borrowing
margin. The contract matures in August 2000. Subsequent to June 30, 1999, this
contract was reduced to $15.0 million.
6. SENIOR SUBORDINATED NOTES
In 1995, the Company issued $100 million of Senior Subordinated Notes which are
due August 15, 2005. In 1997, the Company issued $80 million of additional notes
due August 15, 2005 (collectively, the Notes) with substantially identical terms
to the already outstanding notes at a $3.6 million premium, for an effective
rate of 10.8%. These Notes have an interest rate of 11.75% per annum and are
guaranteed on an unsecured, senior subordinated joint and several basis by each
of the Company's subsidiaries. Pursuant to the settlement of separate interest
rate contracts in effect when each portion of the Notes was issued, the Company
realized a $0.8 million loss and a $2.6 million gain upon the 1997 and 1995
issuances, respectively. The gain and the loss are being amortized as an offset
to interest expense over the term of the Notes. The Notes have customary
restrictive covenants including restrictions on incurrence of additional
indebtedness, payment of dividends and redemption of capital stock. The Notes
are subordinated to all indebtedness under the Senior Bank Facilities and
cross-default provisions do exist. Except in certain limited circumstances, the
Notes are not subject to optional redemption by the Company prior to August 15,
2000, and thereafter are subject to optional redemption by the Company at
declining redemption premiums. Upon the occurrence of a change in control (as
defined), the Company is required to offer to repurchase the Notes at a price
equal to 101% of the principal amount thereof plus accrued interest.
13
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the Six Months Ended June 30, 1999
(Unaudited)
The Company's future operating performance and ability to service or refinance
the Notes and to extend or refinance the senior bank debt will be subject to
future economic conditions and to financial, business and other factors, many of
which are beyond the Company's control.
7. ENVIRONMENTAL MATTERS
The Company's subsidiaries are currently involved in several matters relating to
the investigation and/or remediation of locations where the subsidiaries have
arranged for the disposal of foundry and other wastes. Such matters include five
situations in which the Company, through its TCI subsidiaries and their
predecessors, have been named or are believed to be potentially responsible
parties ("PRP") in the contamination of the sites. With respect to claims
involving Gunite Corporation ("Gunite"), TCI and Gunite in September 1997
entered into a private-party settlement (the "Settlement") of certain pending
litigation with a prior owner of Gunite, pursuant to which each of TCI and
Gunite and the prior owner withdrew their claims against the other. As a result
of the Settlement, TCI and Gunite will not be responsible for liabilities and
costs related to certain alleged contamination of Gunite's facilities and at
certain off-site properties to the extent arising out of operations of Gunite
prior to the acquisition of Gunite by TCI in September 1987. As of June 30,
1999, based on all of the information currently available to the Company, the
Company has an environmental reserve of $10.5 million which management believes
is adequate to cover future expenditures. This reserve is based on current cost
estimates and does not reduce estimated expenditures to net present value,
although the Company's subsidiaries are not likely to incur costs for most of
the reserved matters until several years in the future. Any cash expenditures
required by the Company or its subsidiaries to comply with applicable
environmental laws and/or to pay for any remediation efforts will not be reduced
or otherwise affected by the existence of the environmental reserve. Due to the
early stage of investigation of many of the sites and potential remediations
referred to above, there are significant uncertainties as to waste quantities
involved, the extent and timing of the remediation which will be required, the
range of acceptable solutions, costs of remediation and the number of
potentially responsible parties contributing to such costs. Based on all of the
information presently available, the Company believes that the environmental
reserve will be adequate to cover its future costs related to the sites
associated with the environmental reserve, and that any additional costs will
not have a material adverse effect on the financial condition or results of
operations of the Company. However, the discovery of additional sites, the
modification of existing laws or regulations, the imposition of joint and
several liability or the uncertainties referred to above could result in such a
material adverse effect.
14
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
GENERAL
The Company conducts its continuing business in the truck components segment of
the transportation industry and is a leading manufacturer of wheel-end
components, body chassis components, seating, steerable drive axles, gearboxes
and other castings for the heavy-duty truck industry. The Company's discontinued
operations were in the freight car segment and included a leading manufacturer
and lessor of new and rebuilt freight cars used for hauling coal, intermodal
containers, highway trailers, automobiles, agricultural and mining products.
The Company's sales are affected to a significant degree by the Class 8 truck
markets which are subject to significant fluctuations due to economic
conditions, changes in the alternative methods of transportation and other
factors. There can be no assurance that fluctuations in such markets will not
have a material adverse effect on the results of operations or financial
condition of the Company.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
NET SALES
Net sales for the three months ended June 30, 1999 increased 23.2% to $134.4
million from $109.0 million in the second quarter of 1998. The revenue increase
was primarily due to the second quarter of 1999 acquisitions of Imperial and EMI
and increased sales at Bostrom due to higher class 8 truck builds, partially
offset by a decline in sales at Brillion due to wakness in the agriculture
market.
COST OF SALES AND GROSS PROFITS
Cost of sales for the three months ended June 30, 1999 as a percent of sales was
78.9% in 1999 compared to 79.9% in 1998. Related gross profits were 21.1% and
20.1%, respectively. The increase in gross profit margins in 1999 is primarily a
result of the negative impact of a three week labor strike at Gunite in May
1998.
SELLING, GENERAL, ADMINISTRATIVE AND AMORTIZATION
Selling, general and administrative expenses as a percentage of net sales were
8.2% and 9.1% for the three months ended June 30, 1999 and 1998, respectively.
On a percentage of net sales basis, selling, general and administrative expenses
were reduced due to higher revenues. Amortization expense was $1.9 million and
$1.7 million for the three months ended June 30, 1999 and 1998,
15
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respectively. The increase in amortization expense was due primarily to the
amortization of additional goodwill resulting from the acquisition of Imperial
in the second quarter of 1999.
OPERATING INCOME
Operating income was $15.4 million in the second quarter of 1999, compared to
$12.0 million in the second quarter of 1998. Operating income in the second
quarter of 1998 benefitted from a nonrecurring gain of $1.7 million on the
settlement of a pension plan. Excluding this nonrecurring item, operating income
increased by $5.1 million. During the second quarter of 1999, increased sales
and margins accounted for $6.2 million of the increase, offset by an increase in
selling, general, administrative and amortization expense of $1.1 million.
OTHER
Interest expense, net, was $6.8 million in both second quarters.
The Company recorded extraordinary items, net of income tax, of $2.2 million in
the second quarter of 1999 due to the early repayment of $36.6 million of the
old Tranche B Term debt and in conjunction with the refinancing related to the
Imperial acquisition and repayment of $80.0 million of the new Senior Bank
Credit Facility with proceeds from the sale of the Railcar Business.
Income from discontinued operations for the three months ended June 30, 1999 and
1998 was $11.0 million and $4.3 million, respectively. The company also recorded
a second quarter 1999 after-tax gain of $29.8 million on the sale of the
discontinued Railcar Business (see Note 2 of the Notes to Condensed Consolidated
Financial Statements.)
Net income from continuing operations before extraordinary items and related
diluted earnings per share were $4.7 million and $0.47, respectively, for the
three months ended June 30, 1999 and $2.5 million and $0.25, respectively, for
the 1998 quarter.
Net income and diluted earnings per share for the second quarter of 1999 were
$43.3 million and $4.23, respectively, compared to net income and diluted
earnings per share of $6.2 million and $0.61, respectively, for the second
quarter of 1998.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
NET SALES
Total revenue for the six months ended June 30, 1999 increased by 13.0% to
$251.7 million from $222.8 million in the first six months of 1998. The revenue
increase was due primarily to the acquisition of from Imperial and EMI during
the second quarter of 1999 and increased sales at Bostrom due to higher class 8
truck builds, partially offset by a decline in sales at Brillion due to weakness
in the agriculture market.
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COST OF SALES - AND GROSS PROFITS
Cost of Sales - for the six months ended June 30, 1999 as a percent of
manufacturing sales was 79.0%, compared to 80.0% in 1998. Related gross profits
were 21.0% and 20.0%, respectively. The increase in gross profit percent
resulted primarily from operational improvements during 1999 compared to 1998
which was also negatively effected by a three week labor strike at Gunite in May
1998.
SELLING, GENERAL, ADMINISTRATIVE AND AMORTIZATION
Selling, general, and administrative expenses as a percentage of net sales were
8.4% and 8.9% for the six months of 1999 and 1998, respectively. On a percentage
of total revenue basis selling, general, and administrative expense was reduced
due to higher net sales. Amortization expense as a percentage of net sales was
1.4% and 1.5% for the six months of 1999 and 1998, respectively. The increase in
amortization expense was due primarily to the amortization of intangibles
related to the acquisition of Imperial during the second quarter of 1999.
OPERATING INCOME
Operating income was $28.3 million in the first six months of 1999, compared to
$23.3 million in the first six months of 1998. Operating income in 1998
benefitted $1.7 million from the gain on settlement of a pension plan. Excluding
this nonrecurring item, operating income improved $6.7 million. Increased sales
and margins accounted for $8.2 million of the increase. The increase to
operating income was offset by an increase in selling, general, administrative
and amortization expense of $1.5 million.
OTHER
Income from discontinued operations for the six months ended June 30, 1999 and
1998 was $22.7 million and $17.3 million, respectively. The company also
recorded a second quarter 1999 after-tax gain of $29.8 million on the sale of
the discontinued Railcar Business (see Note 2 of the Notes to Condensed
Consolidated Financial Statements.)
Net income from continuing operations before extraordinary items and related
diluted earnings per share were $7.9 million and $0.79, respectively, for the
six months ended June 30, 1999 and $3.4 million and $0.35, respectively, for
the six months ending June 30, 1998.
Interest expense, net, was $13.6 million in the first half of 1999 compared to
$14.1 million in the first half of 1998.
Net income and diluted earnings per share before the extraordinary item for the
first six months of 1999 were $57.9 million and $5.70, respectively, compared to
a net income and diluted earnings per share of $20.2 million and $2.00,
respectively, for the first six months of 1998.
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LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1999, the Company provided cash from
operations of $15.5 million compared with cash provided of $17.8 million for the
first six months of 1998. The Company provided $19.4 million of cash in the
first half of 1999 from investing activities including, $101.3 million of
proceeds from the sale of the Railcar Business offset by $76.3 used to acquire
Imperial and EMI and $5.7 million used for capital expenditures. Cash used by
financing activities was $35.3 million for the first six months of 1999, mainly
representing new borrowings of $103.1 million offset by debt repayments of
$136.7 million.
As of June 30, 1999, there was $20.0 million of term loans outstanding under the
Senior Bank Credit Facilities, $182.2 million of Notes outstanding, and no
borrowings under the $75.0 million revolving credit line under the Senior Bank
Credit Facility. Availability under the revolving credit line, after
consideration of outstanding letters of credit of $11.2 million, was $63.8
million.
Interest payments on the Notes and interest and principal payments under the
Senior Bank Credit Facility represent significant liquidity requirements for the
Company. The Notes require semiannual interest payments of approximately $10.6
million. Borrowings under the new Senior Bank Credit Facility bears interest at
floating rates and require interest payments on varying dates depending upon the
interest rate option selected by the Company. The term loans under the Senior
Bank Credit Facility required periodic principal payments through their
maturities.
The Company believes that the cash flow generated from its operations, together
with amounts available under its revolving credit line, should be sufficient to
fund its debt service requirements, working capital needs, anticipated capital
expenditures and other operating expenses (including expenditures required by
applicable environmental laws and regulations). The Company's future operating
performance and ability to service or refinance the Notes and to extend or
refinance the new Senior Bank Credit Facilities will be subject to future
economic conditions and to financial, business and other factors, many of which
are beyond the Company's control.
As of June 30, 1999, the Company's balance sheet included cash of $43.8 million.
YEAR 2000
The Year 2000 issue is the result of date-sensitive devices, systems and
computer programs that were deployed using two digits rather than four to define
the applicable year. Any such technology may recognize a year containing "00" as
the year 1900 rather than the year 2000. This issue could result in a system
failure or miscalculations causing disruptions of operations including, among
other things, a temporary inability to process transactions or engage in similar
normal business activities.
In 1996, the Company initiated a comprehensive program to ensure that its
various business systems continue to function properly in the year 2000. By the
end of 1998, all critical business systems at each operating unit had been
reviewed, modified if necessary, and tested.
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All non-critical systems were fully tested and modified by mid 1999. Assessment
of manufacturing processes and facility management systems is complete.
Additionally, the Company has assessed readiness for the year 2000 key suppliers
and other third parties with whom it has significant business relationships.
Information requests have been distributed and replies have been received. No
material risks have been identified at this time. An ongoing monitoring process
is in place and will continue for the remainder of 1999.
Based upon the accomplishments to date, appropriate contingency plans are being
developed. If however, systems of the Company or its key suppliers or other
third parties with whom it has significant business relationships are not Year
2000 compliant on a timely basis and a contingency plan is not developed on a
timely basis, the Year 2000 issue could have a material adverse effect on the
Company's operations and financial condition.
Beginning in 1996, as part of the Company's ongoing information system
improvement process, its enterprise systems were upgraded, which partially
mitigated the impact of the Year 2000 problem. Excluding the cost of upgrading
the enterprise systems, the pretax cost incurred to date of becoming "Year 2000"
compliant has been approximately $0.6 million and is not expected to be more
than $0.7 million for the total project. Such costs are being funded through
operating cash flows.
The cost of the project and expected outcomes are based on management's best
estimates, which were derived using numerous assumptions of future events,
including the continued availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer code, and similar uncertainties. Additionally,
there can be no guarantee that the systems of other companies on which the
Company's systems rely will be timely converted, or that a failure to convert by
another company, or a conversion that is incompatible with the Company's
systems, would not have a material adverse effect on the Company.
ENVIRONMENTAL MATTERS
The Company's subsidiaries are currently involved in several matters relating to
the investigation and/or remediation of locations where the subsidiaries have
arranged for the disposal of foundry and other wastes. Such matters include five
situations in which the Company, through its TCI subsidiaries and their
predecessors, have been named or are believed to be potentially responsible
parties ("PRP") in the contamination of the sites. With respect to claims
involving Gunite Corporation ("Gunite"), TCI and Gunite in September 1997
entered into a private-party settlement (the "Settlement") of certain pending
litigation with a prior owner of Gunite, pursuant to which each of TCI and
Gunite and the prior owner withdrew their claims against the other. As of result
of the Settlement, TCI and Gunite will not be responsible for liabilities and
costs related to certain alleged
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contamination of Gunite's facilities and at certain off-site properties to the
extent arising out of operations of Gunite prior to the acquisition of Gunite by
TCI in September 1987. As of June 30, 1999, based on all of the information
currently available to the Company, the Company has an environmental reserve of
$10.5 million which management believes its adequate to cover future
expenditures. This reserve is based on current cost estimates and does not
reduce estimated expenditures to net present value, although the Company's
subsidiaries are not likely to incur costs for most of the reserved matters
until several years in the future. Any cash expenditures required by the Company
or its subsidiaries to comply with applicable environmental laws and/or to pay
for any remediation efforts will not be reduced or otherwise affected by the
existence of the environmental reserve. Due to the early stage of investigation
of many of the sites and potential remediations referred to above, there are
significant uncertainties as to waste quantities involved, the extent and timing
of the remediation which will be required, the range of acceptable solutions,
costs of remediation and the number of potentially responsible parties
contributing to such costs. Based on all of the information presently available,
the Company believes that the environmental reserve will be adequate to cover
its future costs related to the sites associated with the environmental reserve,
and that any additional costs will not have a material adverse effect on the
financial condition or results of operations of the Company. However, the
discovery of additional sites, the modification of existing laws or regulations,
the imposition of joint and several liability or the uncertainties referred to
above could result in such a material adverse effect.
NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was
issued in June 1998 and must be adopted by the Company by the year 2001. This
new pronouncement will require the Company to record derivatives on the balance
sheet as assets or liabilities, measured at fair value and gains or losses
resulting from the changes in the values of those derivatives to be accounted
for depending on the use of the derivative and whether it qualifies for hedge
accounting. The Company is evaluating the standard and does not expect it to
have a material impact on the financial results or condition of the Company
because the use of derivatives at the Company is not significant.
FORWARD-LOOKING STATEMENTS
The foregoing outlook contains forward-looking statements that are based on
current expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from current expectations due to a number
of factors, including general economic conditions; competitive factors and
pricing pressures; shifts in market demand, the performance and needs of
industries served by the Company's businesses; and the risks described from time
to time in the Company's Securities and Exchange Commission reports.
EFFECTS OF INFLATION
General price inflation has not had a material impact on the Company's results
of operations.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Shareholders was held on May 6, 1999. At the
meeting, shareholders voted on the election of one director and an amendment to
the Company's 1993 Stock Option Plan. The results were as follows:
Election of Directors
VOTES FOR Votes Withheld
Thomas M. Begel l8,832,955 622,683
Amendment to 1993 Stock Option Plan
VOTES FOR Votes Against
8,678,588 749,576
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
99.1 Form of Employment Agreement entered into as of July 1, 1999 between the
Company and Messrs. Begel, Weller, Masek, Tallering, and Mueller.
(B) REPORTS
The Company filed the following reports on Form 8-K during the Six Months Ended
June 30, 1999:
Form 8-K filed by the Company on May 12, 1999 and June 22, 1999 regarding the
sale of the freight car operations.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
By /S/ ANDREW M. WELLER
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Andrew M. Weller
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: August 13, 1999
EMPLOYMENT AGREEMENT FOR THOMAS M. BEGEL
AGREEMENT made effective as of the 1st day of July 1999,
between Transportation Technologies Industries, Inc., a Delaware corporation
(the "Company"), and Thomas M. Begel (the "Executive").
WHEREAS, the Company, through its wholly-owned subsidiaries,
is engaged in the business of manufacturing equipment for the transportation
industry including wheel-end components and air suspension and static seating
for medium and heavy-duty trucks, body and chassis components for heavy duty
trucks, and complex iron castings for a variety of industries including
trucking, automotive, agricultural, construction and industrial machinery (such
business hereinafter referred to as the "Business"); and
WHEREAS, the Executive, as a result of training, expertise and
personal application over the years, has acquired and will continue to acquire
considerable and unique expertise and knowledge which are of substantial value
to the Company in the conduct, management and operation of its Business, and the
Company, having completed the sale of the railcar business, considers it
essential to the best interests of its shareholders to foster the continuous
employment of key management personnel, and to strengthen the Executive's
covenant not to compete and to add a non-solicitation covenant to the Agreement;
and
WHEREAS, the Executive currently serves as President and Chief
Executive Officer and Chairman of the Board of Directors of the Company, and the
Company desires to continue the employment and service of the Executive in such
capacities and is willing to provide the Executive with certain benefits in the
event of the termination of the Executive's employment with the Company; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined below) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control; and
WHEREAS, the parties hereto desire to terminate the prior
employment agreement between the parties hereto and restate the terms of
employment between the Executive and the Company;
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NOW THEREFORE, in consideration of the continued employment of
the Executive by the Company and the benefits to be derived by the Executive
hereunder, and of the Executive's agreement to continued employment by the
Company as provided herein, the parties mutually agree as follows:
EMPLOYMENT; PRIOR EMPLOYMENT AGREEMENT.
The parties hereto agree, effective as of the date hereof, to
terminate the employment agreement, dated as of January 1, 1996, between the
Company and the Executive (the "Prior Employment Agreement"), and agree that,
following termination of the Prior Employment Agreement, there shall be no
liability on the part of either party hereto with respect to the Prior
Employment Agreement.
The Company hereby agrees to continue to employ the Executive,
and the Executive hereby agrees to continue to serve the Company, on the terms
and conditions set forth herein.
TERM. The employment of the Executive by the Company pursuant
to this Agreement will continue as of the date hereof (the "Effective Date") and
shall expire on the third anniversary of the Effective Date (the "Term"), unless
extended, as set forth below, or otherwise terminated pursuant to the provisions
of this Agreement; PROVIDED, HOWEVER, that commencing on the first anniversary
from the Effective Date and on each anniversary thereafter, the Term of this
Agreement shall automatically be extended for one additional year unless, not
later than 90 days prior to such anniversary, the Executive or the Company shall
have given notice in writing that he or it does not wish to extend this
Agreement; and provided further, if a Change in Control shall have occurred
during the Term, this Agreement shall continue in effect and the Term shall be
extended until at least the later of the third anniversary of such Change in
Control or, if such Change in Control shall be caused by the shareholder
approval of a merger or consolidation described in Section 6(d)(iii)(C) hereof,
the third anniversary of the consummation of such merger or consolidation.
POSITION AND DUTIES. The Executive shall serve as President,
Chief Executive Officer and Chairman of the Board of Directors of the Company,
and shall have such responsibilities, duties and authority as are customarily
associated with such offices, including but not limited to, those he may have as
of the Effective Date. The Company shall take all actions necessary to nominate
the Executive as a Director of the Company if the Executive's term as a Director
of the Company shall expire during the Term. The Executive shall devote such
time to the performance of his duties as is necessary to satisfactorily perform
his responsibilities and duties.
PLACE OF PERFORMANCE. In connection with the Executive's
employment by the Company, the Executive shall be based at the offices of the
Company in Chicago, Illinois, except for required travel on the Company's
business to the extent consistent with Company practices prior to the Effective
Date. The Company shall pay all expenses related to such office facilities
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(or comparable office facilities selected by the Executive), including, without
limitation, rent, salaries, equipment, utilities and other operating costs and
expenses.
COMPENSATION AND RELATED MATTERS. As compensation and
consideration for the performance by the Executive of the Executive's duties,
responsibilities and covenants pursuant to this Agreement, the Company will pay
the Executive and the Executive agrees to accept in full payment for such
performance the amounts and benefits set forth below.
SALARY. During the Term of the Executive's employment
hereunder, the Company shall pay to the Executive an annual base salary at a
rate of $750,000 commencing on the first day of the calendar year of the
Effective Date or such higher rate as may from time to time be determined by the
Board, such salary to be paid in substantially equal installments no less
frequently than monthly. This salary may be increased from time to time by the
Company in its sole discretion. Compensation of the Executive by salary payments
shall not be deemed exclusive and shall not prevent the Executive from
participating in any other compensation or benefit plan of the Company or any of
the Company's subsidiaries or affiliates. The salary payments (including any
increased salary payments) hereunder shall not in any way limit or reduce any
other obligation of the Company hereunder or under any other compensation or
benefit plan or agreement under which the Executive is entitled to receive
payments or other benefits from the Company or any of the Company's subsidiaries
or affiliates, and no other compensation, benefit or payment hereunder or under
any other compensation or benefit plan or agreement under which the Executive is
entitled to receive payments or other benefits from the Company shall in any way
limit or reduce the obligation of the Company to pay the Executive's salary
hereunder.
BONUS. During the Term of the Executive's employment
hereunder, the Executive shall participate, in a manner consistent with the
Executive's title, position and responsibilities, in all management incentive
plans made generally available to executives of the Company in comparable
positions (the "Bonus Plans"). The Executive agrees that the actual award of any
cash bonus pursuant to a Bonus Plan may, pursuant to the terms of such plan, be
subject to the achievement of certain financial goals by the Company and/or
certain personal performance goals established for the Executive with respect to
any period for which a cash bonus may be paid pursuant to a Bonus Plan (in each
case such goals having been established by the Board or a committee thereof).
The bonus shall be earned on a pro rata basis during the year. Following the
Executive's Date of Termination for any reason other than Cause, the Company
shall pay to the Executive a lump sum amount, in cash, equal to the difference
between (1) a pro rata portion to the Date of Termination of any annual bonus
award to the Executive for an uncompleted fiscal year, calculated by multiplying
the applicable target bonus thereunder by a fraction the numerator of which is
the number of days the Executive was employed during such fiscal year and the
denominator of which is 365, and (2) the amount of any annual bonus award the
Company has already paid to the Executive for the uncompleted fiscal year.
EXPENSES. During the Term of the Executive's employment
hereunder, the Executive shall be entitled to receive prompt reimbursement for
all reasonable travel and
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entertainment expenses or other out-of-pocket business expenses incurred by the
Executive during the Term in fulfilling the Executive's duties and
responsibilities hereunder, including all expenses of travel and living while
away from home on business or at the request of and in the service of the
Company, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the Company.
RETIREE MEDICAL BENEFITS. Following the Executive's Date of
Termination for any reason other than Cause, the Company shall (at the Company's
sole expense) provide the Executive, the Executive's Spouse and the Executive's
dependents with medical and dental insurance benefits substantially similar to
those benefits "provided" to them immediately prior to the Date of Termination
or, if more favorable to the Executive, those "provided" to them on the
Effective Date, from the Date of Termination until the later of the death of the
Executive or the death of the "Executive's Spouse" (as defined in this Section
5(d)). In determining which benefits were "provided" at the applicable date, the
Executive shall be deemed to have elected the most comprehensive benefits and
coverage available to the Executive at that date (whether or not actually
elected); further, such benefits shall include, without limitation, an
unrestricted right for the Executive, the Executive's Spouse and the Executive's
dependents to select their own care providers. The Company shall provide such
post-termination benefits under its medical and dental plans, to the extent that
the Executive's continued participation is possible under the general terms and
provisions of such plans. To the extent that such participation is not possible,
the Company shall arrange to otherwise provide the Executive with such
post-termination benefits. If the Executive obtains other employment (and the
Executive shall be under no obligation to do so) and the medical and dental
insurance benefits provided by the subsequent employer do not provide
substantially equivalent coverage and benefits (and therefore insurance
continues to be provided pursuant to this Section 5(d), insurance obtained as a
result of such other employment shall be the first line of insurance and
insurance provided under this Section 5(d) shall only be supplementary or
secondary. Also, to the extent that the Executive is, at any time, entitled to
insurance under the Medicare program or its equivalent, the insurance under this
Section 5(d) shall be only supplementary or secondary to the extent allowed by
law. For purposes of this Section 5(d), "Executive's Spouse" shall refer to the
Executive's spouse immediately prior to the termination of the Executive's
employment with the Company.
OTHER BENEFITS AND PERQUISITES. During the Term of the
Executive's employment hereunder:
(i) the Executive shall be entitled to participate in
or receive benefits under any employee retirement or welfare benefit
plan or arrangement made available by the Company at any time during
his employment hereunder to its executive employees (collectively the
"Benefit Plans"), including without limitation each qualified or
non-qualified retirement, thrift or profit sharing plan, life insurance
and accident plan, supplemental pension and life insurance, medical and
dental insurance plans, and disability plan, subject to and on a basis
consistent with the terms, conditions and overall administration of
such plans and arrangements; and
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(ii) the Company shall reimburse the Executive for
reasonable expenses of an automobile chosen by the Executive, in an
amount of up to one thousand five hundred dollars ($1,500) per month as
well as automobile insurance and maintenance, according to the
Company's policies and upon the Executive's presentation of appropriate
documentation. The Executive shall also be entitled to all other
perquisites the Company gives to its executive employees.
The Company shall pay the Executive such additional amount as
is necessary (after taking into account all federal, state and local
income taxes imposed upon the Executive as a result of the receipt of
the benefits and perquisites contemplated by this Section 5(e)) to
place the Executive in the same after-tax position the Executive would
have been in had no income taxes been imposed upon or incurred or paid
by the Executive with respect to such benefits and perquisites (the
"Benefit Gross-Up").
Nothing paid to the Executive under any plan, arrangement or
perquisite currently in effect or made available in the future shall be
deemed to be in lieu of the salary payable to the Executive pursuant to
paragraph (a) of this Section 5. Any payments or benefits payable to
the Executive under this Section 5 in respect of any year during which
the Executive is employed by the Company for less than the entire such
year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such
year during which he is so employed.
VACATIONS. During his employment hereunder, the Executive
shall be entitled to paid vacation in each calendar year, determined in
accordance with the Company's vacation policy. The Executive shall also be
entitled to all paid holidays and personal days given by the Company to its
executive employees.
6. TERMINATION. The Executive's employment hereunder may be
terminated under the following circumstances:
DEATH. The Executive's employment hereunder shall terminate
upon his death.
DISABILITY. If, in the written opinion of a qualified
physician selected by the Company, the Executive shall become unable to perform
his duties hereunder due to physical or mental illness which continues for one
year, the Company may terminate the Executive's employment hereunder.
CAUSE. The Company may terminate the Executive's employment
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
the willful and continuous neglect or refusal to perform the
Executive's duties or responsibilities, or the willful taking of
actions (or willful failures to
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take actions) which materially impair the Executive's ability to
perform his duties or responsibilities which in each case continues
after being brought to the attention of the Executive (other than any
such failure resulting from the Executive's incapacity due to physical
or mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination (as defined in subsection (e)
hereof ); or
any act by the Executive which constitutes gross negligence or
willful misconduct in the performance of his duties hereunder, or the
conviction of the Executive for any felony, in each case which is
materially and manifestly injurious to the Company and which is brought
to the attention of the Executive in writing not more than thirty days
from the date of its discovery by the Company or the Board.
For purposes of this subsection (c), no act, or failure to
act, on the Executive's part shall be considered "willful", unless
done, or omitted to be done, by him not in good faith or without
reasonable belief that his action or omission was in the best interest
of the Company. Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause without (1) reasonable
written notice to the Executive specifying in detail the specific
reasons for the Company's intention to terminate for Cause, (2) an
opportunity for the Executive, together with his counsel, to be heard
before the Board, (3) with respect to actions or inaction specified in
paragraph (i) above, a reasonable opportunity for the Executive to cure
the action or inaction specified by the Company, and (4) delivery to
the Executive of a Notice of Termination, as defined in subsection (e)
hereof.
GOOD REASON.
The Executive may terminate his employment hereunder for Good
Reason.
For purposes of this Agreement, "Good Reason" shall mean,
without the Executive's express written consent, the occurrence of any
of the following circumstances unless such circumstances are fully
corrected prior to the Date of Termination (as defined in subsection
(f) of this Section 6) specified in the Notice of Termination (as
defined in subsection (e) of this Section 6) given in respect thereof:
(A) a material change in the Executive's position, duties,
responsibilities (including reporting responsibilities) or authority,
including, without limitation, removal of the Executive as Chairman of
the Board (except during periods when the Executive is unable to
perform all or substantially all of the Executive's duties and/or
responsibilities on account of the Executive's illness (either physical
or mental) or other incapacity), which, in the Executive's reasonable
judgment, represent an adverse change, (B) a reduction in either the
Executive's annual rate of base salary or level of participation in any
Bonus Plans for which he is eligible under Section 5(b) hereof, (C)
failure to provide facilities or services which are suitable as
determined by the Board of the Company to the Executive's position and
adequate for the performance of the Executive's duties and
responsibilities, including the failure to maintain the Chicago office
without the prior written consent of the
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Executive, or (D) any purported termination by the Company of the
Executive's employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of subsection (e) of this
Section 6 (and for purposes of this Agreement no such purported
termination shall be effective). The Executive's right to terminate
employment pursuant to this subsection shall not be affected by the
Executive's incapacity due to physical or mental illness.
A "Change in Control" shall be deemed to
have occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Com-
pany or its affiliates) representing 20% or
more of the combined voting power of the Company's then
outstanding securities; or
during any period of two consecutive years
(not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a
director designated by a Person who has entered into an
agreement with the Company to effect a transaction described
in clause (A), (B) or (C) of this paragraph) whose election by
the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors, at the beginning of the period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or
the shareholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than (i) merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, at
least 75% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person acquires more than 50% of the combined voting
power of the Company's then outstanding securities; or
the shareholders of the Company approve a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all the Company's assets.
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Notwithstanding the foregoing, a Change in Control shall not include
any transaction with any entity or group which is wholly or partly
controlled by the Chief Executive Officer and one or more of the other
executive officers of the Company in office immediately prior to such
transaction.
For purposes of this Agreement, "Beneficial Owner" shall have
the meaning defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
For purposes of this Agreement, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used herein; however, a Person shall not include (i) the Company or any
of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company.
NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than a termination pursuant
to subsection (a) hereof) shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 12. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated.
"Date of Termination" shall mean (i) if the Executive's
employment is terminated pursuant to subsection (a) above, the date of his
death, (ii) if the Executive's employment is terminated pursuant to subsection
(b) above, thirty days after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty day period), (iii) if the Executive's
employment is terminated pursuant to subsection (c) or (d) above, the date
specified in the Notice of Termination which, in the case of a termination for
Cause shall be the date such Notice of Termination is given (or such later date
as provided therein), and in the case of a termination for Good Reason shall not
be less than twenty (20) nor more than thirty (30) days from the date such
Notice of Termination is given, or (iv) if the Executive terminates his
employment and fails to provide written notice to the Company of such
termination, the date of such termination; PROVIDED, HOWEVER, that if within
fifteen (15) days after any Notice of Termination is given or, if later, prior
to the Date of Termination (as determined without regard to this proviso), the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, then the Date of Termination shall be
the date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has expired and no appeal
has been
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perfected); and PROVIDED, FURTHER, that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the foregoing, if the dispute is resolved
in favor of the Company, the Date of Termination shall not he deemed to have
been extended for purposes of this Agreement. If the Date of Termination is
extended by a notice of dispute, the rights and the obligations of the parties
upon a final determination shall be governed by the terms of this Agreement,
regardless of whether the Agreement otherwise remains in effect on the date of
such final determination. Notwithstanding the pendency of any such dispute, the
Company will continue to pay to the Executive his full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, base salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans and perquisites in which the Executive
was participating when the notice giving rise to the dispute was given and the
Executive shall, at the Company's request, continue to perform his obligations
hereunder, in each case, until the dispute is finally resolved in accordance
with this subsection.
If the Company elects not to have the Executive continue to
perform his obligations hereunder during the pendency of such dispute, and the
Company prevails in such dispute, then the Executive shall promptly return to
the Company any monies (or the value of any benefits) received with respect to
service performed by him after the originally stated Date of Termination to
which the Executive would not have been otherwise entitled.
COMPENSATION UPON TERMINATION, DEATH OR DURING DISABILITY.
During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
the Executive shall continue to receive his full base salary and other benefits
at the rate then in effect for such period (offset by any payments to the
Executive received pursuant to disability benefit plans maintained by the
Company) until his employment is terminated pursuant to Section 6(b) hereof, and
upon such termination, the Company shall pay all other unpaid amounts, if any,
to which the Executive is entitled as of such Date of Termination, including any
expenses owed pursuant to Section 5(c) (which amounts shall be paid in a lump
sum within 10 days of such Date of Termination) and amounts under any
compensation plan or program of the Company, at the time, if any, such payments
are payable to the Executive under the terms of such plan in light of the
circumstances in which such termination occurred, and the Company shall,
thereafter, have no further obligations to the Executive under this Agreement.
If the Executive's employment is terminated by his death, the
Company shall within ten days following the date of the Executive's death, (i)
pay any amounts due to the Executive under Section 5 through the date of his
death and (ii) pay to the Executive's legal representative (A) any death
benefits provided under any Benefit Plan in accordance with their terms and (B)
all other unpaid amounts, if any, to which the Executive is entitled as of the
Date of Termination, including any expenses owed pursuant to Section 5(c) (which
amounts shall he paid in a lump sum within 10 days of such Date of Termination)
and amounts under any compensation plan or program of the Company, at the time,
if any, such payments are payable to
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the Executive under the terms of such plan in light of the circumstances in
which such termination occurred, and the Company shall, thereafter, have no
further obligations to the Executive under this Agreement.
If the Executive's employment is terminated by the Company for
Cause or by the Executive for other than Good Reason, the Company shall pay the
Executive his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and all other unpaid amounts,
if any, to which the Executive is entitled as of the Date of Termination,
including any expenses owed pursuant to Section 5(c) and amounts under any
compensation plan or program of the Company, at the time, if any, such payments
are payable to the Executive under the terms of such plan in light of the
circumstances in which such termination occurred, and the Company shall,
thereafter, have no further obligations to the Executive under this Agreement.
Subject to Section 8 hereof, if (A) in breach of this
Agreement, the Company shall terminate the Executive's employment (it being
understood that a purported termination pursuant to Section 6(b) hereof or
Section 6(c) hereof which is disputed and finally determined not to have been
proper shall be a termination by the Company in breach of this Agreement) or (B)
the Executive shall terminate his employment for Good Reason, then the Company
shall provide the following payments and benefits (collectively, the "Severance
Payments"):
the Company shall pay the Executive his full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given and all other unpaid amounts, if any, to
which the Executive is entitled as of the Date of Termination including
any amounts owed pursuant to Section 5(c) and amounts under any
compensation plan or program of the Company, at the time such payments
are payable to the Executive under the terms of such plan in light of
the circumstances in which such termination occurred; and
in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay as
liquidated damages to the Executive on the Date of Termination, a lump
sum amount equal to the product of (1) the sum of (a) the Executive's
annual base salary rate in effect as of the date Notice of Termination
is given and (b) the greatest of (i) the Executive's guaranteed annual
bonus (if any) with respect to the fiscal year in which the Date of
Termination occurs, (ii) the target annual bonus which may become
payable to the Executive with respect to the fiscal year in which the
Date of Termination occurs, (iii) the annual bonus payments made to the
Executive with respect to the fiscal year immediately prior to the
fiscal year in which the Date of Termination occurs and (iv) the
average of the annual bonus payments made to the Executive with respect
to the three fiscal years immediately prior to the fiscal year in which
the Date of Termination occurs (or such shorter period as the Executive
has been employed by the Company) multiplied by (2) the number three;
and
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notwithstanding any provision of the Company's annual
incentive plans, the Company shall pay to the Executive a lump sum
amount, in cash, equal to the sum of (a) any annual incentive
compensation which has been allocated or awarded to the Executive for
the completed fiscal year preceding the Date of Termination but has not
yet been paid (pursuant to clause (i) above or otherwise), and (b) the
difference between (1) a pro rata portion to the Date of Termination of
the value of any annual contingent incentive compensation award to the
Executive for an uncompleted fiscal year calculated by multiplying the
applicable target bonus thereunder by a fraction the numerator of which
shall be the number of days the Executive was employed during such
fiscal year and the denominator of which shall be 365, and (2) the
amount of any annual incentive compensation award the Company has
already paid to the Executive for the uncompleted fiscal year; and
the Company shall at its own cost continue the participation
of the Executive for a period of three years, in all medical, life and
other employee "welfare" benefit plans and programs (including, without
limitation, all qualified, non-qualified, and supplemental retirement
and welfare benefit plans) in which the Executive was entitled to
participate immediately prior to the Date of Termination, provided that
the Executive's continued participation is permitted under the terms
and provisions of such plans and programs as in effect on the date of
such Termination. In the event that the Executive's participation in
any such plan or program is barred, the Company shall arrange to
provide the Executive with benefits substantially similar to those
which the Executive would otherwise have been entitled to receive under
such plans and programs from which his continued participation is
barred; and
the Company shall, at its own cost, continue to provide the
Executive for a period of three years with the perquisites,
reimbursements and payments the Company gave or provided to the
Executive, pursuant to Section 5(e) of this Agreement, immediately
prior to the Date of Termination; and
the Company shall pay to the Executive (upon presentation of
appropriate invoices and other documentation) an amount equal to the
amount of all legal fees and expenses incurred by the Executive in
contesting, arbitrating or disputing any such termination or in seeking
to obtain or enforce any right or benefit provided by this Agreement;
PROVIDED that, such claim has been brought in good faith by the
Executive and if the Executive shall not be successful, the Executive
shall return 50% of the legal fees and expenses previously reimbursed
to the Executive by the Company; and
if the Company shall fulfill its obligations to the Executive
pursuant to this Section 7(d) then the Company shall, thereafter, have
no further obligations to the Executive under this Agreement.
The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 7 by seeking other employment
or otherwise, nor shall the amount of
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any payment or benefit provided for in this Section 7 be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
The obligations of the Company to make payments and provide
benefits under this Section 7 shall survive the termination of this
Agreement.
TREATMENT OF PARACHUTE PAYMENTS.
Notwithstanding any other provisions of this Agreement, and
except as set forth below, in the event that any payment or benefit received or
to be received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any Person affiliated with
the Company or such Person) (all such payments and benefits, including the
Severance Payments, being hereinafter called "Total Payments") is determined to
be an "excess parachute payment" pursuant to Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor or substitute
provision of the Code, with the effect that Executive is liable for the payment
of the excise tax described in Code Section 4999 or any successor or substitute
provision of the Code (the "Excise Tax"), then, after taking into account any
reduction in the Total Payments provided by reason of Code Section 280G in such
other plan, arrangement or agreement, the cash payments provided in Section
7(d)(ii) of this Agreement shall first be reduced, and the noncash payments and
benefits shall thereafter be reduced, to the extent necessary so that no portion
of the Total Payments is subject to the Excise Tax; provided, however, that
Executive may elect (at any time prior to the payment of any Total Payment under
this Agreement) to have the noncash payments and benefits reduced (or
eliminated) prior to any reduction of the cash payments under this Agreement.
Notwithstanding the foregoing, payments or benefits under this Agreement will
NOT be reduced unless: (i) the net amount of the Total Payments, as so reduced
(and after subtracting the net amount of federal, state and local income taxes
on such reduced Total Payments) IS GREATER than (ii) the difference of (A) the
net amount of such Total Payments, without reduction (but after subtracting the
net amount of federal, state and local income taxes on such Total Payments),
minus (B) the amount of Excise Tax to which the Executive would be subject in
respect of such unreduced Total Payments.
(b) All determinations required to be made under this Section
8, and the assumptions to be utilized in arriving at such determination, shall
be made by the certified public accounting firm used for auditing purposes by
the Company immediately prior to the Date of Termination (the "Accounting
Firm"), which shall provide detailed supporting calculations both to the Company
and the Executive not later than 5 days prior to the Date of Termination. The
Company shall pay all fees and expenses of the Accounting Firm. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive, except as provided in paragraph (c) below.
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(c) As a result of the uncertainty in the application of Code
Sections 280G and 4999 at the time of the initial determination by the
Accounting Firm hereunder, it is possible that the Internal Revenue Service
("IRS") or other agency will claim that an Excise Tax, or a greater Excise Tax,
is due. If the Executive is required to make a payment of any such Excise Tax,
the Company will promptly pay the Executive an additional amount equal to the
amount, or greater amount, of Excise Tax the Executive is required to pay (plus
a gross up payment for any income taxes, interest, penalties or additional
Excise Tax payable by Executive with respect to such Excise Tax or additional
payment), as determined by the Accounting Firm. Executive will notify the
Company in writing of any claim by the IRS or other agency that, if successful,
would require payment by the Company of the additional payments under this
paragraph. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments. The Company shall pay all fees and expenses of the Executive
relating to a claim by the IRS or other agency.
RESTRICTIVE COVENANTS.
(a) COVENANT NOT TO COMPETE. The Executive acknowledges that,
as a key management employee, the Executive will be involved, on a high level,
in the development, implementation and management of the Company's strategies
and plans, including those which involve the Company's finances, research,
marketing, planning, operations, industrial relations and acquisitions, and that
he will have access to Confidential Information, as defined in Section 10. By
virtue of the Executive's unique and sensitive position and special background,
employment of the Executive by a competitor of the Company represents a serious
competitive danger to the Company, and the use of the Executive's talent and
knowledge and information about the Company's business, strategies and plans can
and would constitute a valuable competitive advantage over the Company. In view
of the foregoing, the Executive covenants and agrees that, if the Executive's
employment is terminated (i) by the Company in breach of this Agreement, (ii)
pursuant to an event constituting Good Reason or (iii) under any other
circumstances, then, for a period of two years in the case of clauses (i) and
(ii) of this sentence, and for a period of one year in the case of clause (iii)
of this sentence, after the Date of Termination (the "Non-Compete Period"), the
Executive will not engage or be engaged, in any capacity, directly or
indirectly, including but not limited to, as an employee, agent, consultant,
manager, executive, owner or stockholder (except as a passive investor holding
less than a 5% equity interest in any enterprise) in any business entity
anywhere in North America which is engaged in direct competition with any
business of the Company on the Date of Termination which had revenues of ten
percent (10%) or more of the Company's consolidated revenues for the four most
completed fiscal quarters (a business meeting this requirement shall be referred
to as a "Competitor").
If any court determines that the covenant not to compete contained in
this Section 9, or any part hereof, is unenforceable, such court shall have the
power to reduce the duration or scope of such provision, or make any other
changes, provided that such changes are as close to the terms hereof as possible
and, in its reduced form, such provision shall then be enforceable.
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(b) NON-SOLICITATION OF EMPLOYEES. Executive agrees that,
during the Non- Compete Period, he shall not, without the prior written consent
of the Company, solicit any current employee of the Company or any of its
subsidiaries, or any individual who becomes an employee at or before the Date of
Termination, to leave such employment and join or become affiliated with any
business that is, during the Non-Compete Period, a Competitor.
(c) SURVIVAL OF NON-COMPETE TERMS. The provisions set forth in
this Section 9 shall survive termination of this Agreement.
CONFIDENTIALITY. The Executive recognizes that he will have
access to confidential information, trade secrets, proprietary methods and other
data which are the property of and integral to the operations and success of
Company ("Confidential Information") and therefore agrees to be bound by the
provisions of this Section 10, which both Company and Executive agree and
acknowledge to be reasonable and to be necessary to the Company. In recognition
of this fact, the Executive agrees that the Executive will not disclose any
Confidential Information (except (i) information which becomes publicly
available without violation of this Agreement, (ii) information which the
Executive did not know and should not have known was disclosed to the Executive
in violation of any other person's confidentiality obligation and (iii)
disclosure required in connection with any legal process (after giving the
Company the opportunity to dispute such requirement)) to any person, firm,
corporation, association or other entity, for any reason or purpose whatsoever,
nor shall the Executive make use of any such information for the benefit of any
person, firm, corporation or other entity except the Company. The Executive's
obligation to keep all of such information confidential shall be in effect
during and for a period of two years after the Date of Termination; PROVIDED,
HOWEVER, that the Executive will keep confidential and will not disclose any
trade secret or similar information protected under law as intangible property
(subject to the same exceptions set forth in the parenthetical clause above) for
so long as such protection under law is extended.
BINDING AGREEMENT. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the Executive's
estate.
NOTICE. Notices, demands and all other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered, if delivered personally, or (unless otherwise specified)
mailed by United States certified or regis-
tered mail, return receipt requested, postage prepaid, and when received if
delivered otherwise, addressed as follows:
If to the Executive:
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Thomas M. Begel
20 West Burton Place
Chicago, Illinois 60610
If to the Company:
Transportation Technologies Industries, Inc.
980 North Michigan Avenue
Suite 1000
Chicago, Illinois 60611
Attn: Secretary
With a copy to:
Robert F. Wall, Esq.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
INDEMNIFICATION. Following the Executive's Date of
Termination, the Company will: (i) indemnify and hold harmless the Executive for
all costs, liability and expenses (including reasonable attorneys' fees) for all
acts and omissions of the Executive that relate to the Executive's employment
with the Company, to the maximum extent permitted by law; and (ii) continue the
Executive's coverage under the directors' and officers' liability coverage
maintained by the Company, as in effect from time to time, to the same extent as
other current or former senior executive officers and directors of the Company.
GENERAL PROVISIONS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer of the Company as
may be specifically designated by the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or im-
plied, with respect to the subject matter hereof have been made by either party
which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware without regard to its conflicts of law
principles.
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VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.
COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agree-
ment of the parties hereto in respect of the subject matter contained herein is
hereby terminated and canceled.
IRREPARABLE HARM. The Executive acknowledges that: (i) the
Executive's compliance with this Agreement is necessary to preserve and protect
the proprietary rights, Confidential Information and the goodwill of the Company
and its subsidiaries as going concerns; (ii) any failure by the Executive to
comply with the provisions of this Agreement will result in irreparable and
continuing injury for which there will be no adequate remedy at law; and (iii)
in the event that the Executive should fail to comply with the terms and
conditions of this Agreement, the Company shall be entitled, in addition to such
other relief as may be proper, to all types of equitable relief (including, but
not limited to, the issuance of an injunction and/or temporary restraining
order) as may be necessary to cause the Executive to comply with this Agreement,
to restore to the Company its property, and to make the Company whole.
CONSENT TO JURISDICTION AND FORUM; LEGAL FEES AND COSTS. The
Company and the Executive hereby expressly and irrevocably agree that any
action, whether at law or in equity, arising out of or based upon this Agreement
or the Executive's employment by the Company shall only be brought in a federal
or state court located in Chicago, Illinois. The Executive hereby irrevocably
consents to personal jurisdiction in such court and to accept service of process
in accordance with the provisions of such court. Except as provided in Section
7(d)(v), in connection with any dispute arising out of or based upon this
Agreement or the Executive's employment by the Company, each party shall be
responsible for its or his own legal fees and expenses and all court costs shall
be shared equally by the Company and the Executive unless the court apportions
such legal fees or court costs in a different manner.
WITHHOLDING. All payments made to the Executive pursuant to
this Agreement shall be subject to applicable withholding taxes, if any, and any
amount so withheld shall be deemed to have been paid to the Executive for
purposes of amounts due to the Executive under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
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TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
- --------------------------------
THOMAS M. BEGEL
By:___________________________________
Name:
Title:
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EMPLOYMENT AGREEMENT FOR ANDREW M. WELLER
AGREEMENT made effective as of the 1st day of July 1999,
between Transportation Technologies Industries, Inc., a Delaware corporation
(the "Company"), and Andrew M. Weller (the "Executive").
WHEREAS, the Company, through its wholly-owned subsidiaries,
is engaged in the business of manufacturing equipment for the transportation
industry including wheel-end components and air suspension and static seating
for medium and heavy-duty trucks, body and chassis components for heavy duty
trucks, and complex iron castings for a variety of industries including
trucking, automotive, agricultural, construction and industrial machinery (such
business hereinafter referred to as the "Business"); and
WHEREAS, the Executive, as a result of training, expertise and
personal application over the years, has acquired and will continue to acquire
considerable and unique expertise and knowledge which are of substantial value
to the Company in the conduct, management and operation of its Business, and the
Company, having completed the sale of the railcar business, considers it
essential to the best interests of its shareholders to foster the continuous
employment of key management personnel, and to strengthen the Executive's
covenant not to compete and to add a non-solicitation covenant to the Agreement;
and
WHEREAS, the Executive currently serves as Executive Vice
President and Chief Financial Officer and a Director of the Company, and the
Company desires to continue the employment and service of the Executive in such
capacities and is willing to provide the Executive with certain benefits in the
event of the termination of the Executive's employment with the Company; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined below) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control; and
WHEREAS, the parties hereto desire to terminate the prior
employment agreement between the parties hereto and restate the terms of
employment between the Executive and the Company;
NOW THEREFORE, in consideration of the continued employment of
the Executive by the Company and the benefits to be derived by the Executive
hereunder, and of the
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Executive's agreement to continued employment by the Company as provided herein,
the parties mutually agree as follows:
EMPLOYMENT; PRIOR EMPLOYMENT AGREEMENT.
The parties hereto agree, effective as of the date hereof, to
terminate the employment agreement, dated as of January 1, 1996, between the
Company and the Executive (the "Prior Employment Agreement"), and agree that,
following termination of the Prior Employment Agreement, there shall be no
liability on the part of either party hereto with respect to the Prior
Employment Agreement.
The Company hereby agrees to continue to employ the Executive,
and the Executive hereby agrees to continue to serve the Company, on the terms
and conditions set forth herein.
TERM. The employment of the Executive by the Company pursuant
to this Agreement will continue as of the date hereof (the "Effective Date") and
shall expire on the third anniversary of the Effective Date (the "Term"), unless
extended, as set forth below, or otherwise terminated pursuant to the provisions
of this Agreement; PROVIDED, HOWEVER, that commencing on the first anniversary
from the Effective Date and on each anniversary thereafter, the Term of this
Agreement shall automatically be extended for one additional year unless, not
later than 90 days prior to such anniversary, the Executive or the Company shall
have given notice in writing that he or it does not wish to extend this
Agreement; and provided further, if a Change in Control shall have occurred
during the Term, this Agreement shall continue in effect and the Term shall be
extended until at least the later of the third anniversary of such Change in
Control or, if such Change in Control shall be caused by the shareholder
approval of a merger or consolidation described in Section 6(d)(iii)(C) hereof,
the third anniversary of the consummation of such merger or consolidation.
POSITION AND DUTIES. The Executive shall serve as Executive
Vice President, Chief Financial Officer and Director of the Company, and shall
have such responsibilities, duties and authority as are customarily associated
with such offices, including but not limited to, those he may have as of the
Effective Date. The Company shall take all actions necessary to nominate the
Executive as a Director of the Company if the Executive's term as a Director of
the Company shall expire during the Term. The Executive shall devote such time
to the performance of his duties as is necessary to satisfactorily perform his
responsibilities and duties.
PLACE OF PERFORMANCE. In connection with the Executive's
employment by the Company, the Executive shall be based at the offices of the
Company in Chicago, Illinois, except for required travel on the Company's
business to the extent consistent with Company practices prior to the Effective
Date. The Company shall pay all expenses related to such office facilities (or
comparable office facilities selected by the Executive), including, without
limitation, rent, salaries, equipment, utilities and other operating costs and
expenses.
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COMPENSATION AND RELATED MATTERS. As compensation and
consideration for the performance by the Executive of the Executive's duties,
responsibilities and covenants pursuant to this Agreement, the Company will pay
the Executive and the Executive agrees to accept in full payment for such
performance the amounts and benefits set forth below.
SALARY. During the Term of the Executive's employment
hereunder, the Company shall pay to the Executive an annual base salary at a
rate of $500,000 commencing on the first day of the calendar year of the
Effective Date or such higher rate as may from time to time be determined by the
Board, such salary to be paid in substantially equal installments no less
frequently than monthly. This salary may be increased from time to time by the
Company in its sole discretion. Compensation of the Executive by salary payments
shall not be deemed exclusive and shall not prevent the Executive from
participating in any other compensation or benefit plan of the Company or any of
the Company's subsidiaries or affiliates. The salary payments (including any
increased salary payments) hereunder shall not in any way limit or reduce any
other obligation of the Company hereunder or under any other compensation or
benefit plan or agreement under which the Executive is entitled to receive
payments or other benefits from the Company or any of the Company's subsidiaries
or affiliates, and no other compensation, benefit or payment hereunder or under
any other compensation or benefit plan or agreement under which the Executive is
entitled to receive payments or other benefits from the Company shall in any way
limit or reduce the obligation of the Company to pay the Executive's salary
hereunder.
BONUS. During the Term of the Executive's employment
hereunder, the Executive shall participate, in a manner consistent with the
Executive's title, position and responsibilities, in all management incentive
plans made generally available to executives of the Company in comparable
positions (the "Bonus Plans"). The Executive agrees that the actual award of any
cash bonus pursuant to a Bonus Plan may, pursuant to the terms of such plan, be
subject to the achievement of certain financial goals by the Company and/or
certain personal performance goals established for the Executive with respect to
any period for which a cash bonus may be paid pursuant to a Bonus Plan (in each
case such goals having been established by the Board or a committee thereof).
The bonus shall be earned on a pro rata basis during the year. Following the
Executive's Date of Termination for any reason other than Cause, the Company
shall pay to the Executive a lump sum amount, in cash, equal to the difference
between (1) a pro rata portion to the Date of Termination of any annual bonus
award to the Executive for an uncompleted fiscal year, calculated by multiplying
the applicable target bonus thereunder by a fraction the numerator of which is
the number of days the Executive was employed during such fiscal year and the
denominator of which is 365, and (2) the amount of any annual bonus award the
Company has already paid to the Executive for the uncompleted fiscal year.
EXPENSES. During the Term of the Executive's employment
hereunder, the Executive shall be entitled to receive prompt reimbursement for
all reasonable travel and entertainment expenses or other out-of-pocket business
expenses incurred by the Executive during the Term in fulfilling the Executive's
duties and responsibilities hereunder, including all expenses of travel and
living while away from home on business or at the request of and in the
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service of the Company, provided that such expenses are incurred and accounted
for in accordance with the policies and procedures established by the Company.
RETIREE MEDICAL BENEFITS. Following the Executive's Date of
Termination for any reason other than Cause, the Company shall (at the Company's
sole expense) provide the Executive, the Executive's Spouse and the Executive's
dependents with medical and dental insurance benefits substantially similar to
those benefits "provided" to them immediately prior to the Date of Termination
or, if more favorable to the Executive, those "provided" to them on the
Effective Date, from the Date of Termination until the later of the death of the
Executive or the death of the "Executive's Spouse" (as defined in this Section
5(d)). In determining which benefits were "provided" at the applicable date, the
Executive shall be deemed to have elected the most comprehensive benefits and
coverage available to the Executive at that date (whether or not actually
elected); further, such benefits shall include, without limitation, an
unrestricted right for the Executive, the Executive's Spouse and the Executive's
dependents to select their own care providers. The Company shall provide such
post-termination benefits under its medical and dental plans, to the extent that
the Executive's continued participation is possible under the general terms and
provisions of such plans. To the extent that such participation is not possible,
the Company shall arrange to otherwise provide the Executive with such
post-termination benefits. If the Executive obtains other employment (and the
Executive shall be under no obligation to do so) and the medical and dental
insurance benefits provided by the subsequent employer do not provide
substantially equivalent coverage and benefits (and therefore insurance
continues to be provided pursuant to this Section 5(d), insurance obtained as a
result of such other employment shall be the first line of insurance and
insurance provided under this Section 5(d) shall only be supplementary or
secondary. Also, to the extent that the Executive is, at any time, entitled to
insurance under the Medicare program or its equivalent, the insurance under this
Section 5(d) shall be only supplementary or secondary to the extent allowed by
law. For purposes of this Section 5(d), "Executive's Spouse" shall refer to the
Executive's spouse immediately prior to the termination of the Executive's
employment with the Company.
OTHER BENEFITS AND PERQUISITES. During the Term of the
Executive's employment hereunder:
(i) the Executive shall be entitled to participate in
or receive benefits under any employee retirement or welfare benefit
plan or arrangement made available by the Company at any time during
his employment hereunder to its executive employees (collectively the
"Benefit Plans"), including without limitation each qualified or
non-qualified retirement, thrift or profit sharing plan, life insurance
and accident plan, supplemental pension and life insurance, medical and
dental insurance plans, and disability plan, subject to and on a basis
consistent with the terms, conditions and overall administration of
such plans and arrangements; and
(ii) the Company shall reimburse the Executive for
reasonable expenses of an automobile chosen by the Executive, in an
amount of up to nine hundred fifty dollars ($950) per month as well as
automobile insurance and maintenance,
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according to the Company's policies and upon the Executive's
presentation of appropriate documentation. The Executive shall also be
entitled to all other perquisites the Company gives to its executive
employees.
The Company shall pay the Executive such additional amount as
is necessary (after taking into account all federal, state and local income
taxes imposed upon the Executive as a result of the receipt of the benefits and
perquisites contemplated by this Section 5(e)) to place the Executive in the
same after-tax position the Executive would have been in had no income taxes
been imposed upon or incurred or paid by the Executive with respect to such
benefits and perquisites (the "Benefit Gross-Up").
Nothing paid to the Executive under any plan, arrangement or
perquisite currently in effect or made available in the future shall be deemed
to be in lieu of the salary payable to the Executive pursuant to paragraph (a)
of this Section 5. Any payments or benefits payable to the Executive under this
Section 5 in respect of any year during which the Executive is employed by the
Company for less than the entire such year shall, unless otherwise provided in
the applicable plan or arrangement, be prorated in accordance with the number of
days in such year during which he is so employed.
VACATIONS. During his employment hereunder, the Executive
shall be entitled to paid vacation in each calendar year, determined in
accordance with the Company's vacation policy. The Executive shall also be
entitled to all paid holidays and personal days given by the Company to its
executive employees.
6. TERMINATION. The Executive's employment hereunder may be
terminated under the following circumstances:
DEATH. The Executive's employment hereunder shall terminate
upon his death.
DISABILITY. If, in the written opinion of a qualified
physician selected by the Company, the Executive shall become unable to perform
his duties hereunder due to physical or mental illness which continues for one
year, the Company may terminate the Executive's employment hereunder.
CAUSE. The Company may terminate the Executive's employment
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
the willful and continuous neglect or refusal to perform the
Executive's duties or responsibilities, or the willful taking of
actions (or willful failures to take actions) which materially impair
the Executive's ability to perform his duties or responsibilities which
in each case continues after being brought to the attention of the
Executive (other than any such failure resulting from the Executive's
incapacity due to
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physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination (as defined in subsection
(e) hereof ); or
any act by the Executive which constitutes gross negligence or
willful misconduct in the performance of his duties hereunder, or the
conviction of the Executive for any felony, in each case which is
materially and manifestly injurious to the Company and which is brought
to the attention of the Executive in writing not more than thirty days
from the date of its discovery by the Company or the Board.
For purposes of this subsection (c), no act, or failure to
act, on the Executive's part shall be considered "willful", unless done, or
omitted to be done, by him not in good faith or without reasonable belief that
his action or omission was in the best interest of the Company. Notwithstanding
the foregoing, the Executive shall not be deemed to have been terminated for
Cause without (1) reasonable written notice to the Executive specifying in
detail the specific reasons for the Company's intention to terminate for Cause,
(2) an opportunity for the Executive, together with his counsel, to be heard
before the Board, (3) with respect to actions or inaction specified in paragraph
(i) above, a reasonable opportunity for the Executive to cure the action or
inaction specified by the Company, and (4) delivery to the Executive of a Notice
of Termination, as defined in subsection (e) hereof.
GOOD REASON.
The Executive may terminate his employment hereunder for Good
Reason.
For purposes of this Agreement, "Good Reason" shall mean,
without the Executive's express written consent, the occurrence of any
of the following circumstances unless such circumstances are fully
corrected prior to the Date of Termination (as defined in subsection
(f) of this Section 6) specified in the Notice of Termination (as
defined in subsection (e) of this Section 6) given in respect thereof:
(A) a material change in the Executive's position, duties,
responsibilities (including reporting responsibilities) or authority,
including, without limitation, removal of the Executive from the Board
(except during periods when the Executive is unable to perform all or
substantially all of the Executive's duties and/or responsibilities on
account of the Executive's illness (either physical or mental) or other
incapacity), which, in the Executive's reasonable judgment, represent
an adverse change, (B) a reduction in either the Executive's annual
rate of base salary or level of participation in any Bonus Plans for
which he is eligible under Section 5(b) hereof, (C) failure to provide
facilities or services which are suitable as determined by the Board of
the Company to the Executive's position and adequate for the
performance of the Executive's duties and responsibilities, including
the failure to maintain the Chicago office without the prior written
consent of the Executive, or (D) any purported termination by the
Company of the Executive's employment which is not effected pursuant to
a Notice of Termination satisfying the requirements of subsection (e)
of this Section 6 (and for purposes of this Agreement no
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such purported termination shall be effective). The Executive's right
to terminate employment pursuant to this subsection shall not be
affected by the Executive's incapacity due to physical or mental
illness.
A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have
been satisfied:
any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Com-
pany or its affiliates) representing 20% or
more of the combined voting power of the Company's then
outstanding securities; or
during any period of two consecutive years
(not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a
director designated by a Person who has entered into an
agreement with the Company to effect a transaction described
in clause (A), (B) or (C) of this paragraph) whose election by
the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors, at the beginning of the period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or
the shareholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than (i) merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, at
least 75% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person acquires more than 50% of the combined voting
power of the Company's then outstanding securities; or
the shareholders of the Company approve a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all the Company's assets.
Notwithstanding the foregoing, a Change in Control shall not include
any transaction with any entity or group which is wholly or partly
controlled by the Chief Executive
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Officer and one or more of the other executive officers of the Company
in office immediately prior to such transaction.
For purposes of this Agreement, "Beneficial Owner" shall have
the meaning defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
For purposes of this Agreement, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used herein; however, a Person shall not include (i) the Company or any
of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company.
NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than a termination pursuant
to subsection (a) hereof) shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 12. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated.
"Date of Termination" shall mean (i) if the Executive's
employment is terminated pursuant to subsection (a) above, the date of his
death, (ii) if the Executive's employment is terminated pursuant to subsection
(b) above, thirty days after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty day period), (iii) if the Executive's
employment is terminated pursuant to subsection (c) or (d) above, the date
specified in the Notice of Termination which, in the case of a termination for
Cause shall be the date such Notice of Termination is given (or such later date
as provided therein), and in the case of a termination for Good Reason shall not
be less than twenty (20) nor more than thirty (30) days from the date such
Notice of Termination is given, or (iv) if the Executive terminates his
employment and fails to provide written notice to the Company of such
termination, the date of such termination; PROVIDED, HOWEVER, that if within
fifteen (15) days after any Notice of Termination is given or, if later, prior
to the Date of Termination (as determined without regard to this proviso), the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, then the Date of Termination shall be
the date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has expired and no appeal
has been perfected); and PROVIDED, FURTHER, that the Date of Termination shall
be extended by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the
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resolution of such dispute with reasonable diligence. Notwithstanding the
foregoing, if the dispute is resolved in favor of the Company, the Date of
Termination shall not he deemed to have been extended for purposes of this
Agreement. If the Date of Termination is extended by a notice of dispute, the
rights and the obligations of the parties upon a final determination shall be
governed by the terms of this Agreement, regardless of whether the Agreement
otherwise remains in effect on the date of such final determination.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay to the Executive his full compensation in effect when the notice giving rise
to the dispute was given (including, but not limited to, base salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans and perquisites in which the Executive was participating when
the notice giving rise to the dispute was given and the Executive shall, at the
Company's request, continue to perform his obligations hereunder, in each case,
until the dispute is finally resolved in accordance with this subsection.
If the Company elects not to have the Executive continue to
perform his obligations hereunder during the pendency of such dispute, and the
Company prevails in such dispute, then the Executive shall promptly return to
the Company any monies (or the value of any benefits) received with respect to
service performed by him after the originally stated Date of Termination to
which the Executive would not have been otherwise entitled.
COMPENSATION UPON TERMINATION, DEATH OR DURING DISABILITY.
During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
the Executive shall continue to receive his full base salary and other benefits
at the rate then in effect for such period (offset by any payments to the
Executive received pursuant to disability benefit plans maintained by the
Company) until his employment is terminated pursuant to Section 6(b) hereof, and
upon such termination, the Company shall pay all other unpaid amounts, if any,
to which the Executive is entitled as of such Date of Termination, including any
expenses owed pursuant to Section 5(c) (which amounts shall be paid in a lump
sum within 10 days of such Date of Termination) and amounts under any
compensation plan or program of the Company, at the time, if any, such payments
are payable to the Executive under the terms of such plan in light of the
circumstances in which such termination occurred, and the Company shall,
thereafter, have no further obligations to the Executive under this Agreement.
If the Executive's employment is terminated by his death, the
Company shall within ten days following the date of the Executive's death, (i)
pay any amounts due to the Executive under Section 5 through the date of his
death and (ii) pay to the Executive's legal representative (A) any death
benefits provided under any Benefit Plan in accordance with their terms and (B)
all other unpaid amounts, if any, to which the Executive is entitled as of the
Date of Termination, including any expenses owed pursuant to Section 5(c) (which
amounts shall he paid in a lump sum within 10 days of such Date of Termination)
and amounts under any compensation plan or program of the Company, at the time,
if any, such payments are payable to the Executive under the terms of such plan
in light of the circumstances in which such
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termination occurred, and the Company shall, thereafter, have no further
obligations to the Executive under this Agreement.
If the Executive's employment is terminated by the Company for
Cause or by the Executive for other than Good Reason, the Company shall pay the
Executive his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and all other unpaid amounts,
if any, to which the Executive is entitled as of the Date of Termination,
including any expenses owed pursuant to Section 5(c) and amounts under any
compensation plan or program of the Company, at the time, if any, such payments
are payable to the Executive under the terms of such plan in light of the
circumstances in which such termination occurred, and the Company shall,
thereafter, have no further obligations to the Executive under this Agreement.
Subject to Section 8 hereof, if (A) in breach of this
Agreement, the Company shall terminate the Executive's employment (it being
understood that a purported termination pursuant to Section 6(b) hereof or
Section 6(c) hereof which is disputed and finally determined not to have been
proper shall be a termination by the Company in breach of this Agreement) or (B)
the Executive shall terminate his employment for Good Reason, then the Company
shall provide the following payments and benefits (collectively, the "Severance
Payments"):
the Company shall pay the Executive his full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given and all other unpaid amounts, if any, to
which the Executive is entitled as of the Date of Termination including
any amounts owed pursuant to Section 5(c) and amounts under any
compensation plan or program of the Company, at the time such payments
are payable to the Executive under the terms of such plan in light of
the circumstances in which such termination occurred; and
in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay as
liquidated damages to the Executive on the Date of Termination, a lump
sum amount equal to the product of (1) the sum of (a) the Executive's
annual base salary rate in effect as of the date Notice of Termination
is given and (b) the greatest of (i) the Executive's guaranteed annual
bonus (if any) with respect to the fiscal year in which the Date of
Termination occurs, (ii) the target annual bonus which may become
payable to the Executive with respect to the fiscal year in which the
Date of Termination occurs, (iii) the annual bonus payments made to the
Executive with respect to the fiscal year immediately prior to the
fiscal year in which the Date of Termination occurs and (iv) the
average of the annual bonus payments made to the Executive with respect
to the three fiscal years immediately prior to the fiscal year in which
the Date of Termination occurs (or such shorter period as the Executive
has been employed by the Company) multiplied by (2) the number three;
and
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notwithstanding any provision of the Company's annual
incentive plans, the Company shall pay to the Executive a lump sum
amount, in cash, equal to the sum of (a) any annual incentive
compensation which has been allocated or awarded to the Executive for
the completed fiscal year preceding the Date of Termination but has not
yet been paid (pursuant to clause (i) above or otherwise), and (b) the
difference between (1) a pro rata portion to the Date of Termination of
the value of any annual contingent incentive compensation award to the
Executive for an uncompleted fiscal year calculated by multiplying the
applicable target bonus thereunder by a fraction the numerator of which
shall be the number of days the Executive was employed during such
fiscal year and the denominator of which shall be 365, and (2) the
amount of any annual incentive compensation award the Company has
already paid to the Executive for the uncompleted fiscal year; and
the Company shall at its own cost continue the participation
of the Executive for a period of three years, in all medical, life and
other employee "welfare" benefit plans and programs (including, without
limitation, all qualified, non-qualified, and supplemental retirement
and welfare benefit plans) in which the Executive was entitled to
participate immediately prior to the Date of Termination, provided that
the Executive's continued participation is permitted under the terms
and provisions of such plans and programs as in effect on the date of
such Termination. In the event that the Executive's participation in
any such plan or program is barred, the Company shall arrange to
provide the Executive with benefits substantially similar to those
which the Executive would otherwise have been entitled to receive under
such plans and programs from which his continued participation is
barred; and
the Company shall, at its own cost, continue to provide the
Executive for a period of three years with the perquisites,
reimbursements and payments the Company gave or provided to the
Executive, pursuant to Section 5(e) of this Agreement, immediately
prior to the Date of Termination; and
the Company shall pay to the Executive (upon presentation of
appropriate invoices and other documentation) an amount equal to the
amount of all legal fees and expenses incurred by the Executive in
contesting, arbitrating or disputing any such termination or in seeking
to obtain or enforce any right or benefit provided by this Agreement;
PROVIDED that, such claim has been brought in good faith by the
Executive and if the Executive shall not be successful, the Executive
shall return 50% of the legal fees and expenses previously reimbursed
to the Executive by the Company; and
if the Company shall fulfill its obligations to the Executive
pursuant to this Section 7(d) then the Company shall, thereafter, have
no further obligations to the Executive under this Agreement.
The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 7 by seeking other employment
or otherwise, nor shall the amount of
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any payment or benefit provided for in this Section 7 be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
The obligations of the Company to make payments and provide
benefits under this Section 7 shall survive the termination of this
Agreement.
TREATMENT OF PARACHUTE PAYMENTS.
Notwithstanding any other provisions of this Agreement, and
except as set forth below, in the event that any payment or benefit received or
to be received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any Person affiliated with
the Company or such Person) (all such payments and benefits, including the
Severance Payments, being hereinafter called "Total Payments") is determined to
be an "excess parachute payment" pursuant to Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor or substitute
provision of the Code, with the effect that Executive is liable for the payment
of the excise tax described in Code Section 4999 or any successor or substitute
provision of the Code (the "Excise Tax"), then, after taking into account any
reduction in the Total Payments provided by reason of Code Section 280G in such
other plan, arrangement or agreement, the cash payments provided in Section
7(d)(ii) of this Agreement shall first be reduced, and the noncash payments and
benefits shall thereafter be reduced, to the extent necessary so that no portion
of the Total Payments is subject to the Excise Tax; provided, however, that
Executive may elect (at any time prior to the payment of any Total Payment under
this Agreement) to have the noncash payments and benefits reduced (or
eliminated) prior to any reduction of the cash payments under this Agreement.
Notwithstanding the foregoing, payments or benefits under this Agreement will
NOT be reduced unless: (i) the net amount of the Total Payments, as so reduced
(and after subtracting the net amount of federal, state and local income taxes
on such reduced Total Payments) IS GREATER than (ii) the difference of (A) the
net amount of such Total Payments, without reduction (but after subtracting the
net amount of federal, state and local income taxes on such Total Payments),
minus (B) the amount of Excise Tax to which the Executive would be subject in
respect of such unreduced Total Payments.
(b) All determinations required to be made under this Section
8, and the assumptions to be utilized in arriving at such determination, shall
be made by the certified public accounting firm used for auditing purposes by
the Company immediately prior to the Date of Termination (the "Accounting
Firm"), which shall provide detailed supporting calculations both to the Company
and the Executive not later than 5 days prior to the Date of Termination. The
Company shall pay all fees and expenses of the Accounting Firm. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive, except as provided in paragraph (c) below.
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(c) As a result of the uncertainty in the application of Code
Sections 280G and 4999 at the time of the initial determination by the
Accounting Firm hereunder, it is possible that the Internal Revenue Service
("IRS") or other agency will claim that an Excise Tax, or a greater Excise Tax,
is due. If the Executive is required to make a payment of any such Excise Tax,
the Company will promptly pay the Executive an additional amount equal to the
amount, or greater amount, of Excise Tax the Executive is required to pay (plus
a gross up payment for any income taxes, interest, penalties or additional
Excise Tax payable by Executive with respect to such Excise Tax or additional
payment), as determined by the Accounting Firm. Executive will notify the
Company in writing of any claim by the IRS or other agency that, if successful,
would require payment by the Company of the additional payments under this
paragraph. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments. The Company shall pay all fees and expenses of the Executive
relating to a claim by the IRS or other agency.
RESTRICTIVE COVENANTS.
(a) COVENANT NOT TO COMPETE. The Executive acknowledges that,
as a key management employee, the Executive will be involved, on a high level,
in the development, implementation and management of the Company's strategies
and plans, including those which involve the Company's finances, research,
marketing, planning, operations, industrial relations and acquisitions, and that
he will have access to Confidential Information, as defined in Section 10. By
virtue of the Executive's unique and sensitive position and special background,
employment of the Executive by a competitor of the Company represents a serious
competitive danger to the Company, and the use of the Executive's talent and
knowledge and information about the Company's business, strategies and plans can
and would constitute a valuable competitive advantage over the Company. In view
of the foregoing, the Executive covenants and agrees that, if the Executive's
employment is terminated (i) by the Company in breach of this Agreement, (ii)
pursuant to an event constituting Good Reason or (iii) under any other
circumstances, then, for a period of two years in the case of clauses (i) and
(ii) of this sentence, and for a period of one year in the case of clause (iii)
of this sentence, after the Date of Termination (the "Non-Compete Period"), the
Executive will not engage or be engaged, in any capacity, directly or
indirectly, including but not limited to, as an employee, agent, consultant,
manager, executive, owner or stockholder (except as a passive investor holding
less than a 5% equity interest in any enterprise) in any business entity
anywhere in North America which is engaged in direct competition with any
business of the Company on the Date of Termination which had revenues of ten
percent (10%) or more of the Company's consolidated revenues for the four most
completed fiscal quarters (a business meeting this requirement shall be referred
to as a "Competitor").
If any court determines that the covenant not to compete contained in
this Section 9, or any part hereof, is unenforceable, such court shall have the
power to reduce the duration or scope of such provision, or make any other
changes, provided that such changes are as close to the terms hereof as possible
and, in its reduced form, such provision shall then be enforceable.
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(b) NON-SOLICITATION OF EMPLOYEES. Executive agrees that,
during the Non- Compete Period, he shall not, without the prior written consent
of the Company, solicit any current employee of the Company or any of its
subsidiaries, or any individual who becomes an employee at or before the Date of
Termination, to leave such employment and join or become affiliated with any
business that is, during the Non-Compete Period, a Competitor.
(c) SURVIVAL OF NON-COMPETE TERMS. The provisions set forth in
this Section 9 shall survive termination of this Agreement.
CONFIDENTIALITY. The Executive recognizes that he will have
access to confidential information, trade secrets, proprietary methods and other
data which are the property of and integral to the operations and success of
Company ("Confidential Information") and therefore agrees to be bound by the
provisions of this Section 10, which both Company and Executive agree and
acknowledge to be reasonable and to be necessary to the Company. In recognition
of this fact, the Executive agrees that the Executive will not disclose any
Confidential Information (except (i) information which becomes publicly
available without violation of this Agreement, (ii) information which the
Executive did not know and should not have known was disclosed to the Executive
in violation of any other person's confidentiality obligation and (iii)
disclosure required in connection with any legal process (after giving the
Company the opportunity to dispute such requirement)) to any person, firm,
corporation, association or other entity, for any reason or purpose whatsoever,
nor shall the Executive make use of any such information for the benefit of any
person, firm, corporation or other entity except the Company. The Executive's
obligation to keep all of such information confidential shall be in effect
during and for a period of two years after the Date of Termination; PROVIDED,
HOWEVER, that the Executive will keep confidential and will not disclose any
trade secret or similar information protected under law as intangible property
(subject to the same exceptions set forth in the parenthetical clause above) for
so long as such protection under law is extended.
BINDING AGREEMENT. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the Executive's
estate.
NOTICE. Notices, demands and all other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered, if delivered personally, or (unless otherwise specified)
mailed by United States certified or regis-
tered mail, return receipt requested, postage prepaid, and when received if
delivered otherwise, addressed as follows:
If to the Executive:
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Andrew M. Weller
659 Lincoln Avenue
Winnetka, Illinois 60093
If to the Company:
Transportation Technologies Industries, Inc.
980 North Michigan Avenue
Suite 1000
Chicago, Illinois 60611
Attn: Secretary
With a copy to:
Robert F. Wall, Esq.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
INDEMNIFICATION. Following the Executive's Date of
Termination, the Company will: (i) indemnify and hold harmless the Executive for
all costs, liability and expenses (including reasonable attorneys' fees) for all
acts and omissions of the Executive that relate to the Executive's employment
with the Company, to the maximum extent permitted by law; and (ii) continue the
Executive's coverage under the directors' and officers' liability coverage
maintained by the Company, as in effect from time to time, to the same extent as
other current or former senior executive officers and directors of the Company.
GENERAL PROVISIONS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer of the Company as
may be specifically designated by the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without regard
to its conflicts of law principles.
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VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.
COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agree-
ment of the parties hereto in respect of the subject matter contained herein is
hereby terminated and canceled.
IRREPARABLE HARM. The Executive acknowledges that: (i) the
Executive's compliance with this Agreement is necessary to preserve and protect
the proprietary rights, Confidential Information and the goodwill of the Company
and its subsidiaries as going concerns; (ii) any failure by the Executive to
comply with the provisions of this Agreement will result in irreparable and
continuing injury for which there will be no adequate remedy at law; and (iii)
in the event that the Executive should fail to comply with the terms and
conditions of this Agreement, the Company shall be entitled, in addition to such
other relief as may be proper, to all types of equitable relief (including, but
not limited to, the issuance of an injunction and/or temporary restraining
order) as may be necessary to cause the Executive to comply with this Agreement,
to restore to the Company its property, and to make the Company whole.
CONSENT TO JURISDICTION AND FORUM; LEGAL FEES AND COSTS. The
Company and the Executive hereby expressly and irrevocably agree that any
action, whether at law or in equity, arising out of or based upon this Agreement
or the Executive's employment by the Company shall only be brought in a federal
or state court located in Chicago, Illinois. The Executive hereby irrevocably
consents to personal jurisdiction in such court and to accept service of process
in accordance with the provisions of such court. Except as provided in Section
7(d)(v), in connection with any dispute arising out of or based upon this
Agreement or the Executive's employment by the Company, each party shall be
responsible for its or his own legal fees and expenses and all court costs shall
be shared equally by the Company and the Executive unless the court apportions
such legal fees or court costs in a different manner.
WITHHOLDING. All payments made to the Executive pursuant to
this Agreement shall be subject to applicable withholding taxes, if any, and any
amount so withheld shall be deemed to have been paid to the Executive for
purposes of amounts due to the Executive under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
- --------------------------------
ANDREW M. WELLER
By:
___________________________________
Name:
Title:
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EMPLOYMENT AGREEMENT FOR TIMOTHY A. MASEK
AGREEMENT made effective as of the 1st day of July 1999,
between Transportation Technologies Industries, Inc., a Delaware corporation
(the "Company"), and Timothy A. Masek (the "Executive").
WHEREAS, the Company, through its wholly-owned subsidiaries,
is engaged in the business of manufacturing equipment for the transportation
industry including wheel-end components and air suspension and static seating
for medium and heavy-duty trucks, body and chassis components for heavy duty
trucks, and complex iron castings for a variety of industries including
trucking, automotive, agricultural, construction and industrial machinery (such
business hereinafter referred to as the "Business"); and
WHEREAS, the Executive, as a result of training, expertise and
personal application over the years, has acquired and will continue to acquire
considerable and unique expertise and knowledge which are of substantial value
to the Company in the conduct, management and operation of its Business, and the
Company, having completed the sale of the railcar business, considers it
essential to the best interests of its shareholders to foster the continuous
employment of key management personnel, and to strengthen the Executive's
covenant not to compete and to add a non-solicitation covenant to the Agreement;
and
WHEREAS, the Executive currently serves as Vice President -
Corporate Development of the Company and President of Bostrom Seating, Inc., a
subsidiary of the Company, and the Company desires to continue the employment
and service of the Executive in such capacities and is willing to provide the
Executive with certain benefits in the event of the termination of the
Executive's employment with the Company; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined below) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control; and
WHEREAS, the parties hereto desire to terminate the prior
employment agreement between the parties hereto and restate the terms of
employment between the Executive and the Company;
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NOW THEREFORE, in consideration of the continued employment of
the Executive by the Company and the benefits to be derived by the Executive
hereunder, and of the Executive's agreement to continued employment by the
Company as provided herein, the parties mutually agree as follows:
EMPLOYMENT; PRIOR EMPLOYMENT AGREEMENT.
The parties hereto agree, effective as of the date hereof, to
terminate the employment agreement, dated as of January 1, 1997, between the
Company and the Executive (the "Prior Employment Agreement"), and agree that,
following termination of the Prior Employment Agreement, there shall be no
liability on the part of either party hereto with respect to the Prior
Employment Agreement.
The Company hereby agrees to continue to employ the Executive,
and the Executive hereby agrees to continue to serve the Company, on the terms
and conditions set forth herein.
TERM. The employment of the Executive by the Company pursuant
to this Agreement will continue as of the date hereof (the "Effective Date") and
shall expire on the third anniversary of the Effective Date (the "Term"), unless
extended, as set forth below, or otherwise terminated pursuant to the provisions
of this Agreement; PROVIDED, HOWEVER, that commencing on the first anniversary
from the Effective Date and on each anniversary thereafter, the Term of this
Agreement shall automatically be extended for one additional year unless, not
later than 90 days prior to such anniversary, the Executive or the Company shall
have given notice in writing that he or it does not wish to extend this
Agreement; and provided further, if a Change in Control shall have occurred
during the Term, this Agreement shall continue in effect and the Term shall be
extended until at least the later of the third anniversary of such Change in
Control or, if such Change in Control shall be caused by the shareholder
approval of a merger or consolidation described in Section 6(d)(iii)(C) hereof,
the third anniversary of the consummation of such merger or consolidation.
POSITION AND DUTIES. The Executive shall serve as Vice
President - Corporate Development of the Company and President of Bostrom
Seating, Inc., a subsidiary of the Company, and shall have such
responsibilities, duties and authority as are customarily associated with such
offices, including but not limited to, those he may have as of the Effective
Date. The Executive shall devote such time to the performance of his duties as
is necessary to satisfactorily perform his responsibilities and duties.
PLACE OF PERFORMANCE. In connection with the Executive's
employment by the Company, the Executive shall be based at the offices of the
Company in Chicago, Illinois, except for required travel on the Company's
business to the extent consistent with Company practices prior to the Effective
Date. The Company shall pay all expenses related to such office facilities (or
comparable office facilities selected by the Executive), including, without
limitation, rent, salaries, equipment, utilities and other operating costs and
expenses.
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COMPENSATION AND RELATED MATTERS. As compensation and
consideration for the performance by the Executive of the Executive's duties,
responsibilities and covenants pursuant to this Agreement, the Company will pay
the Executive and the Executive agrees to accept in full payment for such
performance the amounts and benefits set forth below.
SALARY. During the Term of the Executive's employment
hereunder, the Company shall pay to the Executive an annual base salary at a
rate of $200,000 commencing on the first day of the calendar year of the
Effective Date or such higher rate as may from time to time be determined by the
Board, such salary to be paid in substantially equal installments no less
frequently than monthly. This salary may be increased from time to time by the
Company in its sole discretion. Compensation of the Executive by salary payments
shall not be deemed exclusive and shall not prevent the Executive from
participating in any other compensation or benefit plan of the Company or any of
the Company's subsidiaries or affiliates. The salary payments (including any
increased salary payments) hereunder shall not in any way limit or reduce any
other obligation of the Company hereunder or under any other compensation or
benefit plan or agreement under which the Executive is entitled to receive
payments or other benefits from the Company or any of the Company's subsidiaries
or affiliates, and no other compensation, benefit or payment hereunder or under
any other compensation or benefit plan or agreement under which the Executive is
entitled to receive payments or other benefits from the Company shall in any way
limit or reduce the obligation of the Company to pay the Executive's salary
hereunder.
BONUS. During the Term of the Executive's employment
hereunder, the Executive shall participate, in a manner consistent with the
Executive's title, position and responsibilities, in all management incentive
plans made generally available to executives of the Company in comparable
positions (the "Bonus Plans"). The Executive agrees that the actual award of any
cash bonus pursuant to a Bonus Plan may, pursuant to the terms of such plan, be
subject to the achievement of certain financial goals by the Company and/or
certain personal performance goals established for the Executive with respect to
any period for which a cash bonus may be paid pursuant to a Bonus Plan (in each
case such goals having been established by the Board or a committee thereof).
The bonus shall be earned on a pro rata basis during the year. Following the
Executive's Date of Termination for any reason other than Cause, the Company
shall pay to the Executive a lump sum amount, in cash, equal to the difference
between (1) a pro rata portion to the Date of Termination of any annual bonus
award to the Executive for an uncompleted fiscal year, calculated by multiplying
the applicable target bonus thereunder by a fraction the numerator of which is
the number of days the Executive was employed during such fiscal year and the
denominator of which is 365, and (2) the amount of any annual bonus award the
Company has already paid to the Executive for the uncompleted fiscal year.
EXPENSES. During the Term of the Executive's employment
hereunder, the Executive shall be entitled to receive prompt reimbursement for
all reasonable travel and entertainment expenses or other out-of-pocket business
expenses incurred by the Executive during the Term in fulfilling the Executive's
duties and responsibilities hereunder, including all expenses of travel and
living while away from home on business or at the request of and in the
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service of the Company, provided that such expenses are incurred and accounted
for in accordance with the policies and procedures established by the Company.
OTHER BENEFITS AND PERQUISITES. During the Term of the
Executive's employment hereunder:
(i) the Executive shall be entitled to participate in
or receive benefits under any employee retirement or welfare benefit
plan or arrangement made available by the Company at any time during
his employment hereunder to its executive employees (collectively the
"Benefit Plans"), including without limitation each qualified or
non-qualified retirement, thrift or profit sharing plan, life insurance
and accident plan, supplemental pension and life insurance, medical and
dental insurance plans, and disability plan, subject to and on a basis
consistent with the terms, conditions and overall administration of
such plans and arrangements; and
(ii) the Company shall reimburse the Executive for
reasonable expenses of an automobile chosen by the Executive, in an
amount of up to seven hundred fifty dollars ($750) per month as well as
automobile insurance and maintenance, according to the Company's
policies and upon the Executive's presentation of appropriate
documentation. The Executive shall also be entitled to all other
perquisites the Company gives to its executive employees.
The Company shall pay the Executive such additional amount as
is necessary (after taking into account all federal, state and local income
taxes imposed upon the Executive as a result of the receipt of the benefits and
perquisites contemplated by this Section 5(d)) to place the Executive in the
same after-tax position the Executive would have been in had no income taxes
been imposed upon or incurred or paid by the Executive with respect to such
benefits and perquisites (the "Benefit Gross-Up").
Nothing paid to the Executive under any plan, arrangement or
perquisite currently in effect or made available in the future shall be deemed
to be in lieu of the salary payable to the Executive pursuant to paragraph (a)
of this Section 5. Any payments or benefits payable to the Executive under this
Section 5 in respect of any year during which the Executive is employed by the
Company for less than the entire such year shall, unless otherwise provided in
the applicable plan or arrangement, be prorated in accordance with the number of
days in such year during which he is so employed.
VACATIONS. During his employment hereunder, the Executive
shall be entitled to paid vacation in each calendar year, determined in
accordance with the Company's vacation policy. The Executive shall also be
entitled to all paid holidays and personal days given by the Company to its
executive employees.
6. TERMINATION. The Executive's employment hereunder may be
terminated under the following circumstances:
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DEATH. The Executive's employment hereunder shall terminate
upon his death.
DISABILITY. If, in the written opinion of a qualified
physician selected by the Company, the Executive shall become unable to perform
his duties hereunder due to physical or mental illness which continues for one
year, the Company may terminate the Executive's employment hereunder.
CAUSE. The Company may terminate the Executive's employment
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
the willful and continuous neglect or refusal to perform the
Executive's duties or responsibilities, or the willful taking of
actions (or willful failures to take actions) which materially impair
the Executive's ability to perform his duties or responsibilities which
in each case continues after being brought to the attention of the
Executive (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination (as
defined in subsection (e) hereof ); or
any act by the Executive which constitutes gross negligence or
willful misconduct in the performance of his duties hereunder, or the
conviction of the Executive for any felony, in each case which is
materially and manifestly injurious to the Company and which is brought
to the attention of the Executive in writing not more than thirty days
from the date of its discovery by the Company or the Board.
For purposes of this subsection (c), no act, or failure to
act, on the Executive's part shall be considered "willful", unless done, or
omitted to be done, by him not in good faith or without reasonable belief that
his action or omission was in the best interest of the Company. Notwithstanding
the foregoing, the Executive shall not be deemed to have been terminated for
Cause without (1) reasonable written notice to the Executive specifying in
detail the specific reasons for the Company's intention to terminate for Cause,
(2) an opportunity for the Executive, together with his counsel, to be heard
before the Board, (3) with respect to actions or inaction specified in paragraph
(i) above, a reasonable opportunity for the Executive to cure the action or
inaction specified by the Company, and (4) delivery to the Executive of a Notice
of Termination, as defined in subsection (e) hereof.
GOOD REASON.
The Executive may terminate his employment hereunder for Good
Reason.
For purposes of this Agreement, "Good Reason" shall mean,
without the Executive's express written consent, the occurrence of any
of the following
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circumstances unless such circumstances are fully corrected prior to
the Date of Termination (as defined in subsection (f) of this Section
6) specified in the Notice of Termination (as defined in subsection (e)
of this Section 6) given in respect thereof: (A) a material change in
the Executive's position, duties, responsibilities (including reporting
responsibilities) or authority (except during periods when the
Executive is unable to perform all or substantially all of the
Executive's duties and/or responsibilities on account of the
Executive's illness (either physical or mental) or other incapacity),
which, in the Executive's reasonable judgment, represent an adverse
change, (B) a reduction in either the Executive's annual rate of base
salary or level of participation in any Bonus Plans for which he is
eligible under Section 5(b) hereof, (c) failure to provide facilities
or services which are suitable as determined by the Board of the
Company to the Executive's position and adequate for the performance of
the Executive's duties and responsibilities, including the failure to
maintain the Chicago office without the prior written consent of the
Executive, or (D) any purported termination by the Company of the
Executive's employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of subsection (e) of this
Section 6 (and for purposes of this Agreement no such purported
termination shall be effective). The Executive's right to terminate
employment pursuant to this subsection shall not be affected by the
Executive's incapacity due to physical or mental illness.
A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have
been satisfied:
any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Com-
pany or its affiliates) representing 20% or
more of the combined voting power of the Company's then
outstanding securities; or
during any period of two consecutive years
(not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a
director designated by a Person who has entered into an
agreement with the Company to effect a transaction described
in clause (A), (B) or (c) of this paragraph) whose election by
the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors, at the beginning of the period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or
the shareholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than (i) merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining
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outstanding or by being converted into voting securities of
the surviving entity), in combination with the ownership of
any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, at least 75% of the
combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no Person acquires more than 50%
of the combined voting power of the Company's then outstanding
securities; or
the shareholders of the Company approve a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all the Company's assets.
Notwithstanding the foregoing, a Change in Control shall not include
any transaction with any entity or group which is wholly or partly
controlled by the Chief Executive Officer and one or more of the other
executive officers of the Company in office immediately prior to such
transaction.
For purposes of this Agreement, "Beneficial Owner" shall have
the meaning defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
For purposes of this Agreement, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used herein; however, a Person shall not include (i) the Company or any
of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company.
NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than a termination pursuant
to subsection (a) hereof) shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 12. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated.
"Date of Termination" shall mean (i) if the Executive's
employment is terminated pursuant to subsection (a) above, the date of his
death, (ii) if the Executive's employment is terminated pursuant to subsection
(b) above, thirty days after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty day period), (iii) if the Executive's
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employment is terminated pursuant to subsection (c) or (d) above, the date
specified in the Notice of Termination which, in the case of a termination for
Cause shall be the date such Notice of Termination is given (or such later date
as provided therein), and in the case of a termination for Good Reason shall not
be less than twenty (20) nor more than thirty (30) days from the date such
Notice of Termination is given, or (iv) if the Executive terminates his
employment and fails to provide written notice to the Company of such
termination, the date of such termination; PROVIDED, HOWEVER, that if within
fifteen (15) days after any Notice of Termination is given or, if later, prior
to the Date of Termination (as determined without regard to this proviso), the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, then the Date of Termination shall be
the date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has expired and no appeal
has been perfected); and PROVIDED, FURTHER, that the Date of Termination shall
be extended by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the foregoing, if the dispute is resolved
in favor of the Company, the Date of Termination shall not he deemed to have
been extended for purposes of this Agreement. If the Date of Termination is
extended by a notice of dispute, the rights and the obligations of the parties
upon a final determination shall be governed by the terms of this Agreement,
regardless of whether the Agreement otherwise remains in effect on the date of
such final determination. Notwithstanding the pendency of any such dispute, the
Company will continue to pay to the Executive his full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, base salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans and perquisites in which the Executive
was participating when the notice giving rise to the dispute was given and the
Executive shall, at the Company's request, continue to perform his obligations
hereunder, in each case, until the dispute is finally resolved in accordance
with this subsection.
If the Company elects not to have the Executive continue to
perform his obligations hereunder during the pendency of such dispute, and the
Company prevails in such dispute, then the Executive shall promptly return to
the Company any monies (or the value of any benefits) received with respect to
service performed by him after the originally stated Date of Termination to
which the Executive would not have been otherwise entitled.
COMPENSATION UPON TERMINATION, DEATH OR DURING DISABILITY.
During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
the Executive shall continue to receive his full base salary and other benefits
at the rate then in effect for such period (offset by any payments to the
Executive received pursuant to disability benefit plans maintained by the
Company) until his employment is terminated pursuant to Section 6(b) hereof, and
upon such termination, the Company shall pay all other unpaid amounts, if any,
to which the Executive is entitled as of such Date of Termination, including any
expenses owed pursuant to Section 5(c) (which amounts shall be paid in a lump
sum within 10 days of such Date of Termination) and
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amounts under any compensation plan or program of the Company, at the time, if
any, such payments are payable to the Executive under the terms of such plan in
light of the circumstances in which such termination occurred, and the Company
shall, thereafter, have no further obligations to the Executive under this
Agreement.
If the Executive's employment is terminated by his death, the
Company shall within ten days following the date of the Executive's death, (i)
pay any amounts due to the Executive under Section 5 through the date of his
death and (ii) pay to the Executive's legal representative (A) any death
benefits provided under any Benefit Plan in accordance with their terms and (B)
all other unpaid amounts, if any, to which the Executive is entitled as of the
Date of Termination, including any expenses owed pursuant to Section 5(c) (which
amounts shall he paid in a lump sum within 10 days of such Date of Termination)
and amounts under any compensation plan or program of the Company, at the time,
if any, such payments are payable to the Executive under the terms of such plan
in light of the circumstances in which such termination occurred, and the
Company shall, thereafter, have no further obligations to the Executive under
this Agreement.
If the Executive's employment is terminated by the Company for
Cause or by the Executive for other than Good Reason, the Company shall pay the
Executive his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and all other unpaid amounts,
if any, to which the Executive is entitled as of the Date of Termination,
including any expenses owed pursuant to Section 5(c) and amounts under any
compensation plan or program of the Company, at the time, if any, such payments
are payable to the Executive under the terms of such plan in light of the
circumstances in which such termination occurred, and the Company shall,
thereafter, have no further obligations to the Executive under this Agreement.
Subject to Section 8 hereof, if (A) in breach of this
Agreement, the Company shall terminate the Executive's employment (it being
understood that a purported termination pursuant to Section 6(b) hereof or
Section 6(c) hereof which is disputed and finally determined not to have been
proper shall be a termination by the Company in breach of this Agreement) or (B)
the Executive shall terminate his employment for Good Reason, then the Company
shall provide the following payments and benefits (collectively, the "Severance
Payments"):
the Company shall pay the Executive his full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given and all other unpaid amounts, if any, to
which the Executive is entitled as of the Date of Termination including
any amounts owed pursuant to Section 5(c) and amounts under any
compensation plan or program of the Company, at the time such payments
are payable to the Executive under the terms of such plan in light of
the circumstances in which such termination occurred; and
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in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay as
liquidated damages to the Executive on the Date of Termination, a lump
sum amount equal to the product of (1) the sum of (a) the Executive's
annual base salary rate in effect as of the date Notice of Termination
is given and (b) the greatest of (i) the Executive's guaranteed annual
bonus (if any) with respect to the fiscal year in which the Date of
Termination occurs, (ii) the target annual bonus which may become
payable to the Executive with respect to the fiscal year in which the
Date of Termination occurs, (iii) the annual bonus payments made to the
Executive with respect to the fiscal year immediately prior to the
fiscal year in which the Date of Termination occurs and (iv) the
average of the annual bonus payments made to the Executive with respect
to the three fiscal years immediately prior to the fiscal year in which
the Date of Termination occurs (or such shorter period as the Executive
has been employed by the Company) multiplied by (2) the number three;
and
notwithstanding any provision of the Company's annual
incentive plans, the Company shall pay to the Executive a lump sum
amount, in cash, equal to the sum of (a) any annual incentive
compensation which has been allocated or awarded to the Executive for
the completed fiscal year preceding the Date of Termination but has not
yet been paid (pursuant to clause (i) above or otherwise), and (b) the
difference between (1) a pro rata portion to the Date of Termination of
the value of any annual contingent incentive compensation award to the
Executive for an uncompleted fiscal year calculated by multiplying the
applicable target bonus thereunder by a fraction the numerator of which
shall be the number of days the Executive was employed during such
fiscal year and the denominator of which shall be 365, and (2) the
amount of any annual incentive compensation award the Company has
already paid to the Executive for the uncompleted fiscal year; and
the Company shall at its own cost continue the participation
of the Executive for a period of three years, in all medical, life and
other employee "welfare" benefit plans and programs (including, without
limitation, all qualified, non-qualified, and supplemental retirement
and welfare benefit plans) in which the Executive was entitled to
participate immediately prior to the Date of Termination, provided that
the Executive's continued participation is permitted under the terms
and provisions of such plans and programs as in effect on the date of
such Termination. In the event that the Executive's participation in
any such plan or program is barred, the Company shall arrange to
provide the Executive with benefits substantially similar to those
which the Executive would otherwise have been entitled to receive under
such plans and programs from which his continued participation is
barred; and
the Company shall, at its own cost, continue to provide the
Executive for a period of three years with the perquisites,
reimbursements and payments the Company gave or provided to the
Executive, pursuant to Section 5(d) of this Agreement, immediately
prior to the Date of Termination; and
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the Company shall pay to the Executive (upon presentation of
appropriate invoices and other documentation) an amount equal to the
amount of all legal fees and expenses incurred by the Executive in
contesting, arbitrating or disputing any such termination or in seeking
to obtain or enforce any right or benefit provided by this Agreement;
PROVIDED that, such claim has been brought in good faith by the
Executive and if the Executive shall not be successful, the Executive
shall return 50% of the legal fees and expenses previously reimbursed
to the Executive by the Company; and
if the Company shall fulfill its obligations to the Executive
pursuant to this Section 7(d) then the Company shall, thereafter, have
no further obligations to the Executive under this Agreement.
The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 7 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 7 be reduced by any compensation earned by the Executive as the result
of employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
The obligations of the Company to make payments and provide
benefits under this Section 7 shall survive the termination of this Agreement.
TREATMENT OF PARACHUTE PAYMENTS.
Notwithstanding any other provisions of this Agreement, and
except as set forth below, in the event that any payment or benefit received or
to be received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any Person affiliated with
the Company or such Person) (all such payments and benefits, including the
Severance Payments, being hereinafter called "Total Payments") is determined to
be an "excess parachute payment" pursuant to Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor or substitute
provision of the Code, with the effect that Executive is liable for the payment
of the excise tax described in Code Section 4999 or any successor or substitute
provision of the Code (the "Excise Tax"), then, after taking into account any
reduction in the Total Payments provided by reason of Code Section 280G in such
other plan, arrangement or agreement, the cash payments provided in Section
7(d)(ii) of this Agreement shall first be reduced, and the noncash payments and
benefits shall thereafter be reduced, to the extent necessary so that no portion
of the Total Payments is subject to the Excise Tax; provided, however, that
Executive may elect (at any time prior to the payment of any Total Payment under
this Agreement) to have the noncash payments and benefits reduced (or
eliminated) prior to any reduction of the cash payments under this Agreement.
Notwithstanding the foregoing, payments or benefits under this Agreement will
NOT be reduced unless: (i) the net amount of the Total Payments, as so reduced
(and after subtracting the net amount of federal, state and local income taxes
on such reduced Total Payments) IS GREATER than (ii) the difference of (A) the
net amount of
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such Total Payments, without reduction (but after subtracting the net amount of
federal, state and local income taxes on such Total Payments), minus (B) the
amount of Excise Tax to which the Executive would be subject in respect of such
unreduced Total Payments.
(b) All determinations required to be made under this Section
8, and the assumptions to be utilized in arriving at such determination, shall
be made by the certified public accounting firm used for auditing purposes by
the Company immediately prior to the Date of Termination (the "Accounting
Firm"), which shall provide detailed supporting calculations both to the Company
and the Executive not later than 5 days prior to the Date of Termination. The
Company shall pay all fees and expenses of the Accounting Firm. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive, except as provided in paragraph (c) below.
(c) As a result of the uncertainty in the application of Code
Sections 280G and 4999 at the time of the initial determination by the
Accounting Firm hereunder, it is possible that the Internal Revenue Service
("IRS") or other agency will claim that an Excise Tax, or a greater Excise Tax,
is due. If the Executive is required to make a payment of any such Excise Tax,
the Company will promptly pay the Executive an additional amount equal to the
amount, or greater amount, of Excise Tax the Executive is required to pay (plus
a gross up payment for any income taxes, interest, penalties or additional
Excise Tax payable by Executive with respect to such Excise Tax or additional
payment), as determined by the Accounting Firm. Executive will notify the
Company in writing of any claim by the IRS or other agency that, if successful,
would require payment by the Company of the additional payments under this
paragraph. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments. The Company shall pay all fees and expenses of the Executive
relating to a claim by the IRS or other agency.
RESTRICTIVE COVENANTS.
(a) COVENANT NOT TO COMPETE. The Executive acknowledges that,
as a key management employee, the Executive will be involved, on a high level,
in the development, implementation and management of the Company's strategies
and plans, including those which involve the Company's finances, research,
marketing, planning, operations, industrial relations and acquisitions, and that
he will have access to Confidential Information, as defined in Section 10. By
virtue of the Executive's unique and sensitive position and special background,
employment of the Executive by a competitor of the Company represents a serious
competitive danger to the Company, and the use of the Executive's talent and
knowledge and information about the Company's business, strategies and plans can
and would constitute a valuable competitive advantage over the Company. In view
of the foregoing, the Executive covenants and
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agrees that, if the Executive's employment is terminated (i) by the Company in
breach of this Agreement, (ii) pursuant to an event constituting Good Reason or
(iii) under any other circumstances, then, for a period of two years in the case
of clauses (i) and (ii) of this sentence, and for a period of one year in the
case of clause (iii) of this sentence, after the Date of Termination (the
"Non-Compete Period"), the Executive will not engage or be engaged, in any
capacity, directly or indirectly, including but not limited to, as an employee,
agent, consultant, manager, executive, owner or stockholder (except as a passive
investor holding less than a 5% equity interest in any enterprise) in any
business entity anywhere in North America which is engaged in direct competition
with any business of the Company on the Date of Termination which had revenues
of ten percent (10%) or more of the Company's consolidated revenues for the four
most completed fiscal quarters (a business meeting this requirement shall be
referred to as a "Competitor").
If any court determines that the covenant not to compete contained in
this Section 9, or any part hereof, is unenforceable, such court shall have the
power to reduce the duration or scope of such provision, or make any other
changes, provided that such changes are as close to the terms hereof as possible
and, in its reduced form, such provision shall then be enforceable.
(b) NON-SOLICITATION OF EMPLOYEES. Executive agrees that,
during the Non- Compete Period, he shall not, without the prior written consent
of the Company, solicit any current employee of the Company or any of its
subsidiaries, or any individual who becomes an employee at or before the Date of
Termination, to leave such employment and join or become affiliated with any
business that is, during the Non-Compete Period, a Competitor.
(c) SURVIVAL OF NON-COMPETE TERMS. The provisions set forth in
this Section 9 shall survive termination of this Agreement.
CONFIDENTIALITY. The Executive recognizes that he will have
access to confidential information, trade secrets, proprietary methods and other
data which are the property of and integral to the operations and success of
Company ("Confidential Information") and therefore agrees to be bound by the
provisions of this Section 10, which both Company and Executive agree and
acknowledge to be reasonable and to be necessary to the Company. In recognition
of this fact, the Executive agrees that the Executive will not disclose any
Confidential Information (except (i) information which becomes publicly
available without violation of this Agreement, (ii) information which the
Executive did not know and should not have known was disclosed to the Executive
in violation of any other person's confidentiality obligation and (iii)
disclosure required in connection with any legal process (after giving the
Company the opportunity to dispute such requirement)) to any person, firm,
corporation, association or other entity, for any reason or purpose whatsoever,
nor shall the Executive make use of any such information for the benefit of any
person, firm, corporation or other entity except the Company. The Executive's
obligation to keep all of such information confidential shall be in effect
during and for a period of two years after the Date of Termination; PROVIDED,
HOWEVER, that the Executive will keep confidential and will not disclose any
trade secret or similar information protected under law as
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intangible property (subject to the same exceptions set forth in the
parenthetical clause above) for so long as such protection under law is
extended.
BINDING AGREEMENT. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the Executive's
estate.
NOTICE. Notices, demands and all other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered, if delivered personally, or (unless otherwise specified)
mailed by United States certified or regis-
tered mail, return receipt requested, postage prepaid, and when received if
delivered otherwise, addressed as follows:
If to the Executive:
Timothy A. Masek
12 East Quincy, Unit 5
Riverside, Illinois 60546
If to the Company:
Transportation Technologies Industries, Inc.
980 North Michigan Avenue
Suite 1000
Chicago, Illinois 60611
Attn: Secretary
With a copy to:
Robert F. Wall, Esq.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
INDEMNIFICATION. Following the Executive's Date of
Termination, the Company will: (i) indemnify and hold harmless the Executive for
all costs, liability and expenses (including reasonable attorneys' fees) for all
acts and omissions of the Executive that relate to the
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Executive's employment with the Company, to the maximum extent permitted by law;
and (ii) continue the Executive's coverage under the directors' and officers'
liability coverage maintained by the Company, as in effect from time to time, to
the same extent as other current or former senior executive officers and
directors of the Company.
GENERAL PROVISIONS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer of the Company as
may be specifically designated by the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without regard
to its conflicts of law principles.
VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.
COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agree-
ment of the parties hereto in respect of the subject matter contained herein is
hereby terminated and canceled.
IRREPARABLE HARM. The Executive acknowledges that: (i) the
Executive's compliance with this Agreement is necessary to preserve and protect
the proprietary rights, Confidential Information and the goodwill of the Company
and its subsidiaries as going concerns; (ii) any failure by the Executive to
comply with the provisions of this Agreement will result in irreparable and
continuing injury for which there will be no adequate remedy at law; and (iii)
in the event that the Executive should fail to comply with the terms and
conditions of this Agreement, the Company shall be entitled, in addition to such
other relief as may be proper, to all types of equitable relief (including, but
not limited to, the issuance of an injunction and/or temporary restraining
order) as may be necessary to cause the Executive to comply with this Agreement,
to restore to the Company its property, and to make the Company whole.
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CONSENT TO JURISDICTION AND FORUM; LEGAL FEES AND COSTS. The
Company and the Executive hereby expressly and irrevocably agree that any
action, whether at law or in equity, arising out of or based upon this Agreement
or the Executive's employment by the Company shall only be brought in a federal
or state court located in Chicago, Illinois. The Executive hereby irrevocably
consents to personal jurisdiction in such court and to accept service of process
in accordance with the provisions of such court. Except as provided in Section
7(d)(v), in connection with any dispute arising out of or based upon this
Agreement or the Executive's employment by the Company, each party shall be
responsible for its or his own legal fees and expenses and all court costs shall
be shared equally by the Company and the Executive unless the court apportions
such legal fees or court costs in a different manner.
WITHHOLDING. All payments made to the Executive pursuant to
this Agreement shall be subject to applicable withholding taxes, if any, and any
amount so withheld shall be deemed to have been paid to the Executive for
purposes of amounts due to the Executive under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
- --------------------------------
TIMOTHY A. MASEK
By:___________________________________
Name:
Title:
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EMPLOYMENT AGREEMENT FOR KENNETH M. TALLERING
AGREEMENT made effective as of the 1st day of July 1999,
between Transportation Technologies Industries, Inc., a Delaware corporation
(the "Company"), and Kenneth M. Tallering (the "Executive").
WHEREAS, the Company, through its wholly-owned subsidiaries,
is engaged in the business of manufacturing equipment for the transportation
industry including wheel-end components and air suspension and static seating
for medium and heavy-duty trucks, body and chassis components for heavy duty
trucks, and complex iron castings for a variety of industries including
trucking, automotive, agricultural, construction and industrial machinery (such
business hereinafter referred to as the "Business"); and
WHEREAS, the Executive, as a result of training, expertise and
personal application over the years, has acquired and will continue to acquire
considerable and unique expertise and knowledge which are of substantial value
to the Company in the conduct, management and operation of its Business, and the
Company, having completed the sale of the railcar business, considers it
essential to the best interests of its shareholders to foster the continuous
employment of key management personnel, and to strengthen the Executive's
covenant not to compete and to add a non-solicitation covenant to the Agreement;
and
WHEREAS, the Executive currently serves as Vice President,
General Counsel and Secretary of the Company, and the Company desires to
continue the employment and service of the Executive in such capacities and is
willing to provide the Executive with certain benefits in the event of the
termination of the Executive's employment with the Company; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined below) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control; and
WHEREAS, the parties hereto desire to terminate the prior
employment agreement between the parties hereto and restate the terms of
employment between the Executive and the Company;
NOW THEREFORE, in consideration of the continued employment of
the Executive by the Company and the benefits to be derived by the Executive
hereunder, and of the
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Executive's agreement to continued employment by the Company as provided herein,
the parties mutually agree as follows:
EMPLOYMENT; PRIOR EMPLOYMENT AGREEMENT.
The parties hereto agree, effective as of the date hereof, to
terminate the employment agreement, dated as of January 1, 1997, between the
Company and the Executive (the "Prior Employment Agreement"), and agree that,
following termination of the Prior Employment Agreement, there shall be no
liability on the part of either party hereto with respect to the Prior
Employment Agreement.
The Company hereby agrees to continue to employ the Executive,
and the Executive hereby agrees to continue to serve the Company, on the terms
and conditions set forth herein.
TERM. The employment of the Executive by the Company pursuant
to this Agreement will continue as of the date hereof (the "Effective Date") and
shall expire on the third anniversary of the Effective Date (the "Term"), unless
extended, as set forth below, or otherwise terminated pursuant to the provisions
of this Agreement; PROVIDED, HOWEVER, that commencing on the first anniversary
from the Effective Date and on each anniversary thereafter, the Term of this
Agreement shall automatically be extended for one additional year unless, not
later than 90 days prior to such anniversary, the Executive or the Company shall
have given notice in writing that he or it does not wish to extend this
Agreement; and provided further, if a Change in Control shall have occurred
during the Term, this Agreement shall continue in effect and the Term shall be
extended until at least the later of the third anniversary of such Change in
Control or, if such Change in Control shall be caused by the shareholder
approval of a merger or consolidation described in Section 6(d)(iii)(C) hereof,
the third anniversary of the consummation of such merger or consolidation.
POSITION AND DUTIES. The Executive shall serve as Vice
President, General Counsel and Secretary of the Company, and shall have such
responsibilities, duties and authority as are customarily associated with such
offices, including but not limited to, those he may have as of the Effective
Date. The Executive shall devote such time to the performance of his duties as
is necessary to satisfactorily perform his responsibilities and duties.
PLACE OF PERFORMANCE. In connection with the Executive's
employment by the Company, the Executive shall be based at the offices of the
Company in Chicago, Illinois, except for required travel on the Company's
business to the extent consistent with Company practices prior to the Effective
Date. The Company shall pay all expenses related to such office facilities (or
comparable office facilities selected by the Executive), including, without
limitation, rent, salaries, equipment, utilities and other operating costs and
expenses.
COMPENSATION AND RELATED MATTERS. As compensation and
consideration for the performance by the Executive of the Executive's duties,
responsibilities and covenants pursuant
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to this Agreement, the Company will pay the Executive and the Executive agrees
to accept in full payment for such performance the amounts and benefits set
forth below.
SALARY. During the Term of the Executive's employment
hereunder, the Company shall pay to the Executive an annual base salary at a
rate of $200,000 commencing on the first day of the calendar year of the
Effective Date or such higher rate as may from time to time be determined by the
Board, such salary to be paid in substantially equal installments no less
frequently than monthly. This salary may be increased from time to time by the
Company in its sole discretion. Compensation of the Executive by salary payments
shall not be deemed exclusive and shall not prevent the Executive from
participating in any other compensation or benefit plan of the Company or any of
the Company's subsidiaries or affiliates. The salary payments (including any
increased salary payments) hereunder shall not in any way limit or reduce any
other obligation of the Company hereunder or under any other compensation or
benefit plan or agreement under which the Executive is entitled to receive
payments or other benefits from the Company or any of the Company's subsidiaries
or affiliates, and no other compensation, benefit or payment hereunder or under
any other compensation or benefit plan or agreement under which the Executive is
entitled to receive payments or other benefits from the Company shall in any way
limit or reduce the obligation of the Company to pay the Executive's salary
hereunder.
BONUS. During the Term of the Executive's employment
hereunder, the Executive shall participate, in a manner consistent with the
Executive's title, position and responsibilities, in all management incentive
plans made generally available to executives of the Company in comparable
positions (the "Bonus Plans"). The Executive agrees that the actual award of any
cash bonus pursuant to a Bonus Plan may, pursuant to the terms of such plan, be
subject to the achievement of certain financial goals by the Company and/or
certain personal performance goals established for the Executive with respect to
any period for which a cash bonus may be paid pursuant to a Bonus Plan (in each
case such goals having been established by the Board or a committee thereof).
The bonus shall be earned on a pro rata basis during the year. Following the
Executive's Date of Termination for any reason other than Cause, the Company
shall pay to the Executive a lump sum amount, in cash, equal to the difference
between (1) a pro rata portion to the Date of Termination of any annual bonus
award to the Executive for an uncompleted fiscal year, calculated by multiplying
the applicable target bonus thereunder by a fraction the numerator of which is
the number of days the Executive was employed during such fiscal year and the
denominator of which is 365, and (2) the amount of any annual bonus award the
Company has already paid to the Executive for the uncompleted fiscal year.
EXPENSES. During the Term of the Executive's employment
hereunder, the Executive shall be entitled to receive prompt reimbursement for
all reasonable travel and entertainment expenses or other out-of-pocket business
expenses incurred by the Executive during the Term in fulfilling the Executive's
duties and responsibilities hereunder, including all expenses of travel and
living while away from home on business or at the request of and in the service
of the Company, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the Company.
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OTHER BENEFITS AND PERQUISITES. During the Term of the
Executive's employment hereunder:
(i) the Executive shall be entitled to participate in
or receive benefits under any employee retirement or welfare benefit
plan or arrangement made available by the Company at any time during
his employment hereunder to its executive employees (collectively the
"Benefit Plans"), including without limitation each qualified or
non-qualified retirement, thrift or profit sharing plan, life insurance
and accident plan, supplemental pension and life insurance, medical and
dental insurance plans, and disability plan, subject to and on a basis
consistent with the terms, conditions and overall administration of
such plans and arrangements; and
(ii) the Executive shall also be entitled to all
other perquisites the Company gives to its executive employees.
The Company shall pay the Executive such additional amount as
is necessary (after taking into account all federal, state and local income
taxes imposed upon the Executive as a result of the receipt of the benefits and
perquisites contemplated by this Section 5(d)) to place the Executive in the
same after-tax position the Executive would have been in had no income taxes
been imposed upon or incurred or paid by the Executive with respect to such
benefits and perquisites (the "Benefit Gross-Up").
Nothing paid to the Executive under any plan, arrangement or
perquisite currently in effect or made available in the future shall be deemed
to be in lieu of the salary payable to the Executive pursuant to paragraph (a)
of this Section 5. Any payments or benefits payable to the Executive under this
Section 5 in respect of any year during which the Executive is employed by the
Company for less than the entire such year shall, unless otherwise provided in
the applicable plan or arrangement, be prorated in accordance with the number of
days in such year during which he is so employed.
VACATIONS. During his employment hereunder, the Executive
shall be entitled to paid vacation in each calendar year, determined in
accordance with the Company's vacation policy. The Executive shall also be
entitled to all paid holidays and personal days given by the Company to its
executive employees.
6. TERMINATION. The Executive's employment hereunder may be
terminated under the following circumstances:
DEATH. The Executive's employment hereunder shall terminate
upon his death.
DISABILITY. If, in the written opinion of a qualified
physician selected by the Company, the Executive shall become unable to perform
his duties hereunder due to physical
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or mental illness which continues for one year, the Company may terminate the
Executive's employment hereunder.
CAUSE. The Company may terminate the Executive's employment
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
the willful and continuous neglect or refusal to perform the
Executive's duties or responsibilities, or the willful taking of
actions (or willful failures to take actions) which materially impair
the Executive's ability to perform his duties or responsibilities which
in each case continues after being brought to the attention of the
Executive (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination (as
defined in subsection (e) hereof ); or
any act by the Executive which constitutes gross negligence or
willful misconduct in the performance of his duties hereunder, or the
conviction of the Executive for any felony, in each case which is
materially and manifestly injurious to the Company and which is brought
to the attention of the Executive in writing not more than thirty days
from the date of its discovery by the Company or the Board.
For purposes of this subsection (c), no act, or failure to
act, on the Executive's part shall be considered "willful", unless
done, or omitted to be done, by him not in good faith or without
reasonable belief that his action or omission was in the best interest
of the Company. Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause without (1) reasonable
written notice to the Executive specifying in detail the specific
reasons for the Company's intention to terminate for Cause, (2) an
opportunity for the Executive, together with his counsel, to be heard
before the Board, (3) with respect to actions or inaction specified in
paragraph (i) above, a reasonable opportunity for the Executive to cure
the action or inaction specified by the Company, and (4) delivery to
the Executive of a Notice of Termination, as defined in subsection (e)
hereof.
GOOD REASON.
The Executive may terminate his employment hereunder for Good
Reason.
For purposes of this Agreement, "Good Reason" shall mean,
without the Executive's express written consent, the occurrence of any
of the following circumstances unless such circumstances are fully
corrected prior to the Date of Termination (as defined in subsection
(f) of this Section 6) specified in the Notice of Termination (as
defined in subsection (e) of this Section 6) given in respect thereof:
(A) a material change in the Executive's position, duties,
responsibilities (including reporting responsibilities) or authority
(except during periods when the Executive is unable to
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perform all or substantially all of the Executive's duties and/or
responsibilities on account of the Executive's illness (either physical
or mental) or other incapacity), which, in the Executive's reasonable
judgment, represent an adverse change, (B) a reduction in either the
Executive's annual rate of base salary or level of participation in any
Bonus Plans for which he is eligible under Section 5(b) hereof, (c)
failure to provide facilities or services which are suitable as
determined by the Board of the Company to the Executive's position and
adequate for the performance of the Executive's duties and
responsibilities, including the failure to maintain the Chicago office
without the prior written consent of the Executive, or (D) any
purported termination by the Company of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of subsection (e) of this Section 6 (and for purposes
of this Agreement no such purported termination shall be effective).
The Executive's right to terminate employment pursuant to this
subsection shall not be affected by the Executive's incapacity due to
physical or mental illness.
A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have
been satisfied:
any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Com-
pany or its affiliates) representing 20% or
more of the combined voting power of the Company's then
outstanding securities; or
during any period of two consecutive years
(not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a
director designated by a Person who has entered into an
agreement with the Company to effect a transaction described
in clause (A), (B) or (c) of this paragraph) whose election by
the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors, at the beginning of the period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or
the shareholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than (i) merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, at
least 75% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a
merger
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or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no Person
acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or
the shareholders of the Company approve a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all the Company's assets.
Notwithstanding the foregoing, a Change in Control shall not include
any transaction with any entity or group which is wholly or partly
controlled by the Chief Executive Officer and one or more of the other
executive officers of the Company in office immediately prior to such
transaction.
For purposes of this Agreement, "Beneficial Owner" shall have
the meaning defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
For purposes of this Agreement, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used herein; however, a Person shall not include (i) the Company or any
of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company.
NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than a termination pursuant
to subsection (a) hereof) shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 12. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated.
"Date of Termination" shall mean (i) if the Executive's
employment is terminated pursuant to subsection (a) above, the date of his
death, (ii) if the Executive's employment is terminated pursuant to subsection
(b) above, thirty days after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty day period), (iii) if the Executive's
employment is terminated pursuant to subsection (c) or (d) above, the date
specified in the Notice of Termination which, in the case of a termination for
Cause shall be the date such Notice of Termination is given (or such later date
as provided therein), and in the case of a termination for Good Reason shall not
be less than twenty (20) nor more than thirty (30) days from the date such
Notice of Termination is given, or (iv) if the Executive terminates his
employment and fails to
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provide written notice to the Company of such termination, the date of such
termination; PROVIDED, HOWEVER, that if within fifteen (15) days after any
Notice of Termination is given or, if later, prior to the Date of Termination
(as determined without regard to this proviso), the party receiving such Notice
of Termination notifies the other party that a dispute exists concerning the
termination, then the Date of Termination shall be the date on which the dispute
is finally determined, either by mutual written agreement of the parties, by a
binding arbitration award or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected); and
PROVIDED, FURTHER, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the foregoing, if the dispute is resolved in favor of the
Company, the Date of Termination shall not he deemed to have been extended for
purposes of this Agreement. If the Date of Termination is extended by a notice
of dispute, the rights and the obligations of the parties upon a final
determination shall be governed by the terms of this Agreement, regardless of
whether the Agreement otherwise remains in effect on the date of such final
determination. Notwithstanding the pendency of any such dispute, the Company
will continue to pay to the Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans and perquisites in which the Executive was participating
when the notice giving rise to the dispute was given and the Executive shall, at
the Company's request, continue to perform his obligations hereunder, in each
case, until the dispute is finally resolved in accordance with this subsection.
If the Company elects not to have the Executive continue to
perform his obligations hereunder during the pendency of such dispute, and the
Company prevails in such dispute, then the Executive shall promptly return to
the Company any monies (or the value of any benefits) received with respect to
service performed by him after the originally stated Date of Termination to
which the Executive would not have been otherwise entitled.
COMPENSATION UPON TERMINATION, DEATH OR DURING DISABILITY.
During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
the Executive shall continue to receive his full base salary and other benefits
at the rate then in effect for such period (offset by any payments to the
Executive received pursuant to disability benefit plans maintained by the
Company) until his employment is terminated pursuant to Section 6(b) hereof, and
upon such termination, the Company shall pay all other unpaid amounts, if any,
to which the Executive is entitled as of such Date of Termination, including any
expenses owed pursuant to Section 5(c) (which amounts shall be paid in a lump
sum within 10 days of such Date of Termination) and amounts under any
compensation plan or program of the Company, at the time, if any, such payments
are payable to the Executive under the terms of such plan in light of the
circumstances in which such termination occurred, and the Company shall,
thereafter, have no further obligations to the Executive under this Agreement.
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If the Executive's employment is terminated by his death, the
Company shall within ten days following the date of the Executive's death, (i)
pay any amounts due to the Executive under Section 5 through the date of his
death and (ii) pay to the Executive's legal representative (A) any death
benefits provided under any Benefit Plan in accordance with their terms and (B)
all other unpaid amounts, if any, to which the Executive is entitled as of the
Date of Termination, including any expenses owed pursuant to Section 5(c) (which
amounts shall he paid in a lump sum within 10 days of such Date of Termination)
and amounts under any compensation plan or program of the Company, at the time,
if any, such payments are payable to the Executive under the terms of such plan
in light of the circumstances in which such termination occurred, and the
Company shall, thereafter, have no further obligations to the Executive under
this Agreement.
If the Executive's employment is terminated by the Company for
Cause or by the Executive for other than Good Reason, the Company shall pay the
Executive his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and all other unpaid amounts,
if any, to which the Executive is entitled as of the Date of Termination,
including any expenses owed pursuant to Section 5(c) and amounts under any
compensation plan or program of the Company, at the time, if any, such payments
are payable to the Executive under the terms of such plan in light of the
circumstances in which such termination occurred, and the Company shall,
thereafter, have no further obligations to the Executive under this Agreement.
Subject to Section 8 hereof, if (A) in breach of this
Agreement, the Company shall terminate the Executive's employment (it being
understood that a purported termination pursuant to Section 6(b) hereof or
Section 6(c) hereof which is disputed and finally determined not to have been
proper shall be a termination by the Company in breach of this Agreement) or (B)
the Executive shall terminate his employment for Good Reason, then the Company
shall provide the following payments and benefits (collectively, the "Severance
Payments"):
the Company shall pay the Executive his full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given and all other unpaid amounts, if any, to
which the Executive is entitled as of the Date of Termination including
any amounts owed pursuant to Section 5(c) and amounts under any
compensation plan or program of the Company, at the time such payments
are payable to the Executive under the terms of such plan in light of
the circumstances in which such termination occurred; and
in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay as
liquidated damages to the Executive on the Date of Termination, a lump
sum amount equal to the product of (1) the sum of (a) the Executive's
annual base salary rate in effect as of the date Notice of Termination
is given and (b) the greatest of (i) the Executive's guaranteed annual
bonus (if any) with respect to the fiscal year in which the Date of
Termination occurs, (ii) the
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target annual bonus which may become payable to the Executive with
respect to the fiscal year in which the Date of Termination occurs,
(iii) the annual bonus payments made to the Executive with respect to
the fiscal year immediately prior to the fiscal year in which the Date
of Termination occurs and (iv) the average of the annual bonus payments
made to the Executive with respect to the three fiscal years
immediately prior to the fiscal year in which the Date of Termination
occurs (or such shorter period as the Executive has been employed by
the Company) multiplied by (2) the number three; and
notwithstanding any provision of the Company's annual
incentive plans, the Company shall pay to the Executive a lump sum
amount, in cash, equal to the sum of (a) any annual incentive
compensation which has been allocated or awarded to the Executive for
the completed fiscal year preceding the Date of Termination but has not
yet been paid (pursuant to clause (i) above or otherwise), and (b) the
difference between (1) a pro rata portion to the Date of Termination of
the value of any annual contingent incentive compensation award to the
Executive for an uncompleted fiscal year calculated by multiplying the
applicable target bonus thereunder by a fraction the numerator of which
shall be the number of days the Executive was employed during such
fiscal year and the denominator of which shall be 365, and (2) the
amount of any annual incentive compensation award the Company has
already paid to the Executive for the uncompleted fiscal year; and
the Company shall at its own cost continue the participation
of the Executive for a period of three years, in all medical, life and
other employee "welfare" benefit plans and programs (including, without
limitation, all qualified, non-qualified, and supplemental retirement
and welfare benefit plans) in which the Executive was entitled to
participate immediately prior to the Date of Termination, provided that
the Executive's continued participation is permitted under the terms
and provisions of such plans and programs as in effect on the date of
such Termination. In the event that the Executive's participation in
any such plan or program is barred, the Company shall arrange to
provide the Executive with benefits substantially similar to those
which the Executive would otherwise have been entitled to receive under
such plans and programs from which his continued participation is
barred; and
the Company shall, at its own cost, continue to provide the
Executive for a period of three years with the perquisites,
reimbursements and payments the Company gave or provided to the
Executive, pursuant to Section 5(d) of this Agreement, immediately
prior to the Date of Termination; and
the Company shall pay to the Executive (upon presentation of
appropriate invoices and other documentation) an amount equal to the
amount of all legal fees and expenses incurred by the Executive in
contesting, arbitrating or disputing any such termination or in seeking
to obtain or enforce any right or benefit provided by this Agreement;
PROVIDED that, such claim has been brought in good faith by the
Executive
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and if the Executive shall not be successful, the Executive shall
return 50% of the legal fees and expenses previously reimbursed to the
Executive by the Company; and
if the Company shall fulfill its obligations to the Executive
pursuant to this Section 7(d) then the Company shall, thereafter, have
no further obligations to the Executive under this Agreement.
The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 7 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 7 be reduced by any compensation earned by the Executive as the result
of employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
The obligations of the Company to make payments and provide
benefits under this Section 7 shall survive the termination of this Agreement.
TREATMENT OF PARACHUTE PAYMENTS.
Notwithstanding any other provisions of this Agreement, and
except as set forth below, in the event that any payment or benefit received or
to be received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any Person affiliated with
the Company or such Person) (all such payments and benefits, including the
Severance Payments, being hereinafter called "Total Payments") is determined to
be an "excess parachute payment" pursuant to Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor or substitute
provision of the Code, with the effect that Executive is liable for the payment
of the excise tax described in Code Section 4999 or any successor or substitute
provision of the Code (the "Excise Tax"), then, after taking into account any
reduction in the Total Payments provided by reason of Code Section 280G in such
other plan, arrangement or agreement, the cash payments provided in Section
7(d)(ii) of this Agreement shall first be reduced, and the noncash payments and
benefits shall thereafter be reduced, to the extent necessary so that no portion
of the Total Payments is subject to the Excise Tax; provided, however, that
Executive may elect (at any time prior to the payment of any Total Payment under
this Agreement) to have the noncash payments and benefits reduced (or
eliminated) prior to any reduction of the cash payments under this Agreement.
Notwithstanding the foregoing, payments or benefits under this Agreement will
NOT be reduced unless: (i) the net amount of the Total Payments, as so reduced
(and after subtracting the net amount of federal, state and local income taxes
on such reduced Total Payments) IS GREATER than (ii) the difference of (A) the
net amount of such Total Payments, without reduction (but after subtracting the
net amount of federal, state and local income taxes on such Total Payments),
minus (B) the amount of Excise Tax to which the Executive would be subject in
respect of such unreduced Total Payments.
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(b) All determinations required to be made under this Section
8, and the assumptions to be utilized in arriving at such determination, shall
be made by the certified public accounting firm used for auditing purposes by
the Company immediately prior to the Date of Termination (the "Accounting
Firm"), which shall provide detailed supporting calculations both to the Company
and the Executive not later than 5 days prior to the Date of Termination. The
Company shall pay all fees and expenses of the Accounting Firm. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive, except as provided in paragraph (c) below.
(c) As a result of the uncertainty in the application of Code
Sections 280G and 4999 at the time of the initial determination by the
Accounting Firm hereunder, it is possible that the Internal Revenue Service
("IRS") or other agency will claim that an Excise Tax, or a greater Excise Tax,
is due. If the Executive is required to make a payment of any such Excise Tax,
the Company will promptly pay the Executive an additional amount equal to the
amount, or greater amount, of Excise Tax the Executive is required to pay (plus
a gross up payment for any income taxes, interest, penalties or additional
Excise Tax payable by Executive with respect to such Excise Tax or additional
payment), as determined by the Accounting Firm. Executive will notify the
Company in writing of any claim by the IRS or other agency that, if successful,
would require payment by the Company of the additional payments under this
paragraph. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments. The Company shall pay all fees and expenses of the Executive
relating to a claim by the IRS or other agency.
RESTRICTIVE COVENANTS.
(a) COVENANT NOT TO COMPETE. The Executive acknowledges that,
as a key management employee, the Executive will be involved, on a high level,
in the development, implementation and management of the Company's strategies
and plans, including those which involve the Company's finances, research,
marketing, planning, operations, industrial relations and acquisitions, and that
he will have access to Confidential Information, as defined in Section 10. By
virtue of the Executive's unique and sensitive position and special background,
employment of the Executive by a competitor of the Company represents a serious
competitive danger to the Company, and the use of the Executive's talent and
knowledge and information about the Company's business, strategies and plans can
and would constitute a valuable competitive advantage over the Company. In view
of the foregoing, the Executive covenants and agrees that, if the Executive's
employment is terminated (i) by the Company in breach of this Agreement, (ii)
pursuant to an event constituting Good Reason or (iii) under any other
circumstances, then, for a period of two years in the case of clauses (i) and
(ii) of this sentence, and for a period of one year in the case of clause (iii)
of this sentence, after the Date of Termination (the "Non-Compete Period"), the
Executive will not engage or be engaged, in any capacity, directly or
indirectly, including but not limited to, as an employee, agent, consultant,
manager, executive, owner or stockholder (except as a passive investor holding
less than a 5% equity interest in any enterprise) in any business entity
anywhere in North America which is
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engaged in direct competition with any business of the Company on the Date of
Termination which had revenues of ten percent (10%) or more of the Company's
consolidated revenues for the four most completed fiscal quarters (a business
meeting this requirement shall be referred to as a "Competitor").
If any court determines that the covenant not to compete contained in
this Section 9, or any part hereof, is unenforceable, such court shall have the
power to reduce the duration or scope of such provision, or make any other
changes, provided that such changes are as close to the terms hereof as possible
and, in its reduced form, such provision shall then be enforceable.
(b) NON-SOLICITATION OF EMPLOYEES. Executive agrees that,
during the Non- Compete Period, he shall not, without the prior written consent
of the Company, solicit any current employee of the Company or any of its
subsidiaries, or any individual who becomes an employee at or before the Date of
Termination, to leave such employment and join or become affiliated with any
business that is, during the Non-Compete Period, a Competitor.
(c) SURVIVAL OF NON-COMPETE TERMS. The provisions set forth in
this Section 9 shall survive termination of this Agreement.
CONFIDENTIALITY. The Executive recognizes that he will have
access to confidential information, trade secrets, proprietary methods and other
data which are the property of and integral to the operations and success of
Company ("Confidential Information") and therefore agrees to be bound by the
provisions of this Section 10, which both Company and Executive agree and
acknowledge to be reasonable and to be necessary to the Company. In recognition
of this fact, the Executive agrees that the Executive will not disclose any
Confidential Information (except (i) information which becomes publicly
available without violation of this Agreement, (ii) information which the
Executive did not know and should not have known was disclosed to the Executive
in violation of any other person's confidentiality obligation and (iii)
disclosure required in connection with any legal process (after giving the
Company the opportunity to dispute such requirement)) to any person, firm,
corporation, association or other entity, for any reason or purpose whatsoever,
nor shall the Executive make use of any such information for the benefit of any
person, firm, corporation or other entity except the Company. The Executive's
obligation to keep all of such information confidential shall be in effect
during and for a period of two years after the Date of Termination; PROVIDED,
HOWEVER, that the Executive will keep confidential and will not disclose any
trade secret or similar information protected under law as intangible property
(subject to the same exceptions set forth in the parenthetical clause above) for
so long as such protection under law is extended.
BINDING AGREEMENT. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance
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with the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
NOTICE. Notices, demands and all other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered, if delivered personally, or (unless otherwise specified)
mailed by United States certified or regis-
tered mail, return receipt requested, postage prepaid, and when received if
delivered otherwise, addressed as follows:
If to the Executive:
Kenneth M. Tallering
641 West Willow, # 212
Chicago, Illinois 60614
If to the Company:
Transportation Technologies Industries, Inc.
980 North Michigan Avenue
Suite 1000
Chicago, Illinois 60611
Attn: Chief Financial Officer
With a copy to:
Robert F. Wall, Esq.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
INDEMNIFICATION. Following the Executive's Date of
Termination, the Company will: (i) indemnify and hold harmless the Executive for
all costs, liability and expenses (including reasonable attorneys' fees) for all
acts and omissions of the Executive that relate to the Executive's employment
with the Company, to the maximum extent permitted by law; and (ii) continue the
Executive's coverage under the directors' and officers' liability coverage
maintained by the Company, as in effect from time to time, to the same extent as
other current or former senior executive officers and directors of the Company.
GENERAL PROVISIONS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer of the Company as
may be specifically designated by the Board. No
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waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Delaware without regard to its conflicts of law principles.
VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.
COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agree-
ment of the parties hereto in respect of the subject matter contained herein is
hereby terminated and canceled.
IRREPARABLE HARM. The Executive acknowledges that: (i) the
Executive's compliance with this Agreement is necessary to preserve and protect
the proprietary rights, Confidential Information and the goodwill of the Company
and its subsidiaries as going concerns; (ii) any failure by the Executive to
comply with the provisions of this Agreement will result in irreparable and
continuing injury for which there will be no adequate remedy at law; and (iii)
in the event that the Executive should fail to comply with the terms and
conditions of this Agreement, the Company shall be entitled, in addition to such
other relief as may be proper, to all types of equitable relief (including, but
not limited to, the issuance of an injunction and/or temporary restraining
order) as may be necessary to cause the Executive to comply with this Agreement,
to restore to the Company its property, and to make the Company whole.
CONSENT TO JURISDICTION AND FORUM; LEGAL FEES AND COSTS. The
Company and the Executive hereby expressly and irrevocably agree that any
action, whether at law or in equity, arising out of or based upon this Agreement
or the Executive's employment by the Company shall only be brought in a federal
or state court located in Chicago, Illinois. The Executive hereby irrevocably
consents to personal jurisdiction in such court and to accept service of process
in accordance with the provisions of such court. Except as provided in Section
7(d)(v), in connection with any dispute arising out of or based upon this
Agreement or the Executive's employment by the Company, each party shall be
responsible for its or his own legal fees and
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expenses and all court costs shall be shared equally by the Company and the
Executive unless the court apportions such legal fees or court costs in a
different manner.
WITHHOLDING. All payments made to the Executive pursuant to
this Agreement shall be subject to applicable withholding taxes, if any, and any
amount so withheld shall be deemed to have been paid to the Executive for
purposes of amounts due to the Executive under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
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KENNETH M. TALLERING
By:___________________________________
Name:
Title:
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EMPLOYMENT AGREEMENT FOR DONALD C. MUELLER
AGREEMENT made effective as of the 1st day of July 1999,
between Transportation Technologies Industries, Inc., a Delaware corporation
(the "Company"), and Donald C. Mueller (the "Executive").
WHEREAS, the Company, through its wholly-owned subsidiaries,
is engaged in the business of manufacturing equipment for the transportation
industry including wheel-end components and air suspension and static seating
for medium and heavy-duty trucks, body and chassis components for heavy duty
trucks, and complex iron castings for a variety of industries including
trucking, automotive, agricultural, construction and industrial machinery (such
business hereinafter referred to as the "Business"); and
WHEREAS, the Executive, as a result of training, expertise and
personal application over the years, has acquired and will continue to acquire
considerable and unique expertise and knowledge which are of substantial value
to the Company in the conduct, management and operation of its Business, and the
Company, having completed the sale of the railcar business, considers it
essential to the best interests of its shareholders to foster the continuous
employment of key management personnel, and to strengthen the Executive's
covenant not to compete and to add a non-solicitation covenant to the Agreement;
and
WHEREAS, the Executive currently serves as Vice President and
Treasurer of the Company, and the Company desires to continue the employment and
service of the Executive in such capacities and is willing to provide the
Executive with certain benefits in the event of the termination of the
Executive's employment with the Company; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined below) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control; and
NOW THEREFORE, in consideration of the continued employment of
the Executive by the Company and the benefits to be derived by the Executive
hereunder, and of the Executive's agreement to continued employment by the
Company as provided herein, the parties mutually agree as follows:
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EMPLOYMENT. The Company hereby agrees to continue to employ
the Executive, and the Executive hereby agrees to continue to serve the Company,
on the terms and conditions set forth herein.
TERM. The employment of the Executive by the Company pursuant
to this Agreement will continue as of the date hereof (the "Effective Date") and
shall expire on the second anniversary of the Effective Date (the "Term"),
unless extended, as set forth below, or otherwise terminated pursuant to the
provisions of this Agreement; PROVIDED, HOWEVER, that commencing on the first
anniversary from the Effective Date and on each anniversary thereafter, the Term
of this Agreement shall automatically be extended for one additional year
unless, not later than 90 days prior to such anniversary, the Executive or the
Company shall have given notice in writing that he or it does not wish to extend
this Agreement; and provided further, if a Change in Control shall have occurred
during the Term, this Agreement shall continue in effect and the Term shall be
extended until at least the later of the second anniversary of such Change in
Control or, if such Change in Control shall be caused by the shareholder
approval of a merger or consolidation described in Section 6(d)(iii)(C) hereof,
the second anniversary of the consummation of such merger or consolidation.
POSITION AND DUTIES. The Executive shall serve as Vice
President and Treasurer of the Company, and shall have such responsibilities,
duties and authority as are customarily associated with such offices, including
but not limited to, those he may have as of the Effective Date. The Executive
shall devote such time to the performance of his duties as is necessary to
satisfactorily perform his responsibilities and duties.
PLACE OF PERFORMANCE. In connection with the Executive's
employment by the Company, the Executive shall be based at the offices of the
Company in Chicago, Illinois, except for required travel on the Company's
business to the extent consistent with Company practices prior to the Effective
Date. The Company shall pay all expenses related to such office facilities (or
comparable office facilities selected by the Executive), including, without
limitation, rent, salaries, equipment, utilities and other operating costs and
expenses.
COMPENSATION AND RELATED MATTERS. As compensation and
consideration for the performance by the Executive of the Executive's duties,
responsibilities and covenants pursuant to this Agreement, the Company will pay
the Executive and the Executive agrees to accept in full payment for such
performance the amounts and benefits set forth below.
SALARY. During the Term of the Executive's employment
hereunder, the Company shall pay to the Executive an annual base salary at a
rate of $160,000 commencing on the first day of the calendar year of the
Effective Date or such higher rate as may from time to time be determined by the
Board, such salary to be paid in substantially equal installments no less
frequently than monthly. This salary may be increased from time to time by the
Company in its sole discretion. Compensation of the Executive by salary payments
shall not be deemed exclusive and shall not prevent the Executive from
participating in any other compensation or
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benefit plan of the Company or any of the Company's subsidiaries or affiliates.
The salary payments (including any increased salary payments) hereunder shall
not in any way limit or reduce any other obligation of the Company hereunder or
under any other compensation or benefit plan or agreement under which the
Executive is entitled to receive payments or other benefits from the Company or
any of the Company's subsidiaries or affiliates, and no other compensation,
benefit or payment hereunder or under any other compensation or benefit plan or
agreement under which the Executive is entitled to receive payments or other
benefits from the Company shall in any way limit or reduce the obligation of the
Company to pay the Executive's salary hereunder.
BONUS. During the Term of the Executive's employment
hereunder, the Executive shall participate, in a manner consistent with the
Executive's title, position and responsibilities, in all management incentive
plans made generally available to executives of the Company in comparable
positions (the "Bonus Plans"). The Executive agrees that the actual award of any
cash bonus pursuant to a Bonus Plan may, pursuant to the terms of such plan, be
subject to the achievement of certain financial goals by the Company and/or
certain personal performance goals established for the Executive with respect to
any period for which a cash bonus may be paid pursuant to a Bonus Plan (in each
case such goals having been established by the Board or a committee thereof).
The bonus shall be earned on a pro rata basis during the year. Following the
Executive's Date of Termination for any reason other than Cause, the Company
shall pay to the Executive a lump sum amount, in cash, equal to the difference
between (1) a pro rata portion to the Date of Termination of any annual bonus
award to the Executive for an uncompleted fiscal year, calculated by multiplying
the applicable target bonus thereunder by a fraction the numerator of which is
the number of days the Executive was employed during such fiscal year and the
denominator of which is 365, and (2) the amount of any annual bonus award the
Company has already paid to the Executive for the uncompleted fiscal year.
EXPENSES. During the Term of the Executive's employment
hereunder, the Executive shall be entitled to receive prompt reimbursement for
all reasonable travel and entertainment expenses or other out-of-pocket business
expenses incurred by the Executive during the Term in fulfilling the Executive's
duties and responsibilities hereunder, including all expenses of travel and
living while away from home on business or at the request of and in the service
of the Company, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the Company.
OTHER BENEFITS AND PERQUISITES. During the Term of the
Executive's employment hereunder:
(i) the Executive shall be entitled to participate in
or receive benefits under any employee retirement or welfare benefit
plan or arrangement made available by the Company at any time during
his employment hereunder to its executive employees (collectively the
"Benefit Plans"), including without limitation each qualified or
non-qualified retirement, thrift or profit sharing plan, life insurance
and accident plan,
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supplemental pension and life insurance, medical and dental insurance
plans, and disability plan, subject to and on a basis consistent with
the terms, conditions and overall administration of such plans and
arrangements; and
(ii) the Executive shall also be entitled to all
other perquisites the Company gives to its executive employees.
The Company shall pay the Executive such additional amount as
is necessary (after taking into account all federal, state and local income
taxes imposed upon the Executive as a result of the receipt of the benefits and
perquisites contemplated by this Section 5(d)) to place the Executive in the
same after-tax position the Executive would have been in had no income taxes
been imposed upon or incurred or paid by the Executive with respect to such
benefits and perquisites (the "Benefit Gross-Up").
Nothing paid to the Executive under any plan, arrangement or
perquisite currently in effect or made available in the future shall be deemed
to be in lieu of the salary payable to the Executive pursuant to paragraph (a)
of this Section 5. Any payments or benefits payable to the Executive under this
Section 5 in respect of any year during which the Executive is employed by the
Company for less than the entire such year shall, unless otherwise provided in
the applicable plan or arrangement, be prorated in accordance with the number of
days in such year during which he is so employed.
VACATIONS. During his employment hereunder, the Executive
shall be entitled to paid vacation in each calendar year, determined in
accordance with the Company's vacation policy. The Executive shall also be
entitled to all paid holidays and personal days given by the Company to its
executive employees.
6. TERMINATION. The Executive's employment hereunder may be
terminated under the following circumstances:
DEATH. The Executive's employment hereunder shall terminate
upon his death.
DISABILITY. If, in the written opinion of a qualified
physician selected by the Company, the Executive shall become unable to perform
his duties hereunder due to physical or mental illness which continues for one
year, the Company may terminate the Executive's employment hereunder.
CAUSE. The Company may terminate the Executive's employment
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
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the willful and continuous neglect or refusal to perform the
Executive's duties or responsibilities, or the willful taking of
actions (or willful failures to take actions) which materially impair
the Executive's ability to perform his duties or responsibilities which
in each case continues after being brought to the attention of the
Executive (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination (as
defined in subsection (e) hereof ); or
any act by the Executive which constitutes gross negligence or
willful misconduct in the performance of his duties hereunder, or the
conviction of the Executive for any felony, in each case which is
materially and manifestly injurious to the Company and which is brought
to the attention of the Executive in writing not more than thirty days
from the date of its discovery by the Company or the Board.
For purposes of this subsection (c), no act, or failure to
act, on the Executive's part shall be considered "willful", unless
done, or omitted to be done, by him not in good faith or without
reasonable belief that his action or omission was in the best interest
of the Company. Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause without (1) reasonable
written notice to the Executive specifying in detail the specific
reasons for the Company's intention to terminate for Cause, (2) an
opportunity for the Executive, together with his counsel, to be heard
before the Board, (3) with respect to actions or inaction specified in
paragraph (i) above, a reasonable opportunity for the Executive to cure
the action or inaction specified by the Company, and (4) delivery to
the Executive of a Notice of Termination, as defined in subsection (e)
hereof.
GOOD REASON.
The Executive may terminate his employment hereunder for Good
Reason.
For purposes of this Agreement, "Good Reason" shall mean,
without the Executive's express written consent, the occurrence of any
of the following circumstances unless such circumstances are fully
corrected prior to the Date of Termination (as defined in subsection
(f) of this Section 6) specified in the Notice of Termination (as
defined in subsection (e) of this Section 6) given in respect thereof:
(A) a material change in the Executive's position, duties,
responsibilities (including reporting responsibilities) or authority
(except during periods when the Executive is unable to perform all or
substantially all of the Executive's duties and/or responsibilities on
account of the Executive's illness (either physical or mental) or other
incapacity), which, in the Executive's reasonable judgment, represent
an adverse change, (B) a reduction in either the Executive's annual
rate of base salary or level of participation in any Bonus Plans for
which he is eligible under Section 5(b) hereof, (c) failure to provide
facilities or services which are suitable as determined by the Board of
the Company to the Executive's position
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and adequate for the performance of the Executive's duties and
responsibilities, including the failure to maintain the Chicago office
without the prior written consent of the Executive, or (D) any
purported termination by the Company of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of subsection (e) of this Section 6 (and for purposes
of this Agreement no such purported termination shall be effective).
The Executive's right to terminate employment pursuant to this
subsection shall not be affected by the Executive's incapacity due to
physical or mental illness.
A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have
been satisfied:
any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Com-
pany or its affiliates) representing 20% or
more of the combined voting power of the Company's then
outstanding securities; or
during any period of two consecutive years
(not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a
director designated by a Person who has entered into an
agreement with the Company to effect a transaction described
in clause (A), (B) or (c) of this paragraph) whose election by
the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors, at the beginning of the period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or
the shareholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than (i) merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, at
least 75% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person acquires more than 50% of the combined voting
power of the Company's then outstanding securities; or
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the shareholders of the Company approve a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all the Company's assets.
Notwithstanding the foregoing, a Change in Control shall not include
any transaction with any entity or group which is wholly or partly
controlled by the Chief Executive Officer and one or more of the other
executive officers of the Company in office immediately prior to such
transaction.
For purposes of this Agreement, "Beneficial Owner" shall have
the meaning defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
For purposes of this Agreement, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used herein; however, a Person shall not include (i) the Company or any
of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company.
NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than a termination pursuant
to subsection (a) hereof) shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 12. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated.
"Date of Termination" shall mean (i) if the Executive's
employment is terminated pursuant to subsection (a) above, the date of his
death, (ii) if the Executive's employment is terminated pursuant to subsection
(b) above, thirty days after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty day period), (iii) if the Executive's
employment is terminated pursuant to subsection (c) or (d) above, the date
specified in the Notice of Termination which, in the case of a termination for
Cause shall be the date such Notice of Termination is given (or such later date
as provided therein), and in the case of a termination for Good Reason shall not
be less than twenty (20) nor more than thirty (30) days from the date such
Notice of Termination is given, or (iv) if the Executive terminates his
employment and fails to provide written notice to the Company of such
termination, the date of such termination; PROVIDED, HOWEVER, that if within
fifteen (15) days after any Notice of Termination is given or, if later, prior
to the Date of Termination (as determined without regard to this proviso), the
party
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receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, then the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has expired and no appeal
has been perfected); and PROVIDED, FURTHER, that the Date of Termination shall
be extended by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the foregoing, if the dispute is resolved
in favor of the Company, the Date of Termination shall not he deemed to have
been extended for purposes of this Agreement. If the Date of Termination is
extended by a notice of dispute, the rights and the obligations of the parties
upon a final determination shall be governed by the terms of this Agreement,
regardless of whether the Agreement otherwise remains in effect on the date of
such final determination. Notwithstanding the pendency of any such dispute, the
Company will continue to pay to the Executive his full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, base salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans and perquisites in which the Executive
was participating when the notice giving rise to the dispute was given and the
Executive shall, at the Company's request, continue to perform his obligations
hereunder, in each case, until the dispute is finally resolved in accordance
with this subsection.
If the Company elects not to have the Executive continue to
perform his obligations hereunder during the pendency of such dispute, and the
Company prevails in such dispute, then the Executive shall promptly return to
the Company any monies (or the value of any benefits) received with respect to
service performed by him after the originally stated Date of Termination to
which the Executive would not have been otherwise entitled.
COMPENSATION UPON TERMINATION, DEATH OR DURING DISABILITY.
During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
the Executive shall continue to receive his full base salary and other benefits
at the rate then in effect for such period (offset by any payments to the
Executive received pursuant to disability benefit plans maintained by the
Company) until his employment is terminated pursuant to Section 6(b) hereof, and
upon such termination, the Company shall pay all other unpaid amounts, if any,
to which the Executive is entitled as of such Date of Termination, including any
expenses owed pursuant to Section 5(c) (which amounts shall be paid in a lump
sum within 10 days of such Date of Termination) and amounts under any
compensation plan or program of the Company, at the time, if any, such payments
are payable to the Executive under the terms of such plan in light of the
circumstances in which such termination occurred, and the Company shall,
thereafter, have no further obligations to the Executive under this Agreement.
If the Executive's employment is terminated by his death, the
Company shall within ten days following the date of the Executive's death, (i)
pay any amounts due to the
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Executive under Section 5 through the date of his death and (ii) pay to the
Executive's legal representative (A) any death benefits provided under any
Benefit Plan in accordance with their terms and (B) all other unpaid amounts, if
any, to which the Executive is entitled as of the Date of Termination, including
any expenses owed pursuant to Section 5(c) (which amounts shall he paid in a
lump sum within 10 days of such Date of Termination) and amounts under any
compensation plan or program of the Company, at the time, if any, such payments
are payable to the Executive under the terms of such plan in light of the
circumstances in which such termination occurred, and the Company shall,
thereafter, have no further obligations to the Executive under this Agreement.
If the Executive's employment is terminated by the Company for
Cause or by the Executive for other than Good Reason, the Company shall pay the
Executive his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and all other unpaid amounts,
if any, to which the Executive is entitled as of the Date of Termination,
including any expenses owed pursuant to Section 5(c) and amounts under any
compensation plan or program of the Company, at the time, if any, such payments
are payable to the Executive under the terms of such plan in light of the
circumstances in which such termination occurred, and the Company shall,
thereafter, have no further obligations to the Executive under this Agreement.
Subject to Section 8 hereof, if (A) in breach of this
Agreement, the Company shall terminate the Executive's employment (it being
understood that a purported termination pursuant to Section 6(b) hereof or
Section 6(c) hereof which is disputed and finally determined not to have been
proper shall be a termination by the Company in breach of this Agreement) or (B)
the Executive shall terminate his employment for Good Reason, then the Company
shall provide the following payments and benefits (collectively, the "Severance
Payments"):
the Company shall pay the Executive his full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given and all other unpaid amounts, if any, to
which the Executive is entitled as of the Date of Termination including
any amounts owed pursuant to Section 5(c) and amounts under any
compensation plan or program of the Company, at the time such payments
are payable to the Executive under the terms of such plan in light of
the circumstances in which such termination occurred; and
in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay as
liquidated damages to the Executive on the Date of Termination, a lump
sum amount equal to the product of (1) the sum of (a) the Executive's
annual base salary rate in effect as of the date Notice of Termination
is given and (b) the greatest of (i) the Executive's guaranteed annual
bonus (if any) with respect to the fiscal year in which the Date of
Termination occurs, (ii) the target annual bonus which may become
payable to the Executive with respect to the fiscal
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year in which the Date of Termination occurs, (iii) the annual bonus
payments made to the Executive with respect to the fiscal year
immediately prior to the fiscal year in which the Date of Termination
occurs and (iv) the average of the annual bonus payments made to the
Executive with respect to the three fiscal years immediately prior to
the fiscal year in which the Date of Termination occurs (or such
shorter period as the Executive has been employed by the Company)
multiplied by (2) the number two; and
notwithstanding any provision of the Company's annual
incentive plans, the Company shall pay to the Executive a lump sum
amount, in cash, equal to the sum of (a) any annual incentive
compensation which has been allocated or awarded to the Executive for
the completed fiscal year preceding the Date of Termination but has not
yet been paid (pursuant to clause (i) above or otherwise), and (b) the
difference between (1) a pro rata portion to the Date of Termination of
the value of any annual contingent incentive compensation award to the
Executive for an uncompleted fiscal year calculated by multiplying the
applicable target bonus thereunder by a fraction the numerator of which
shall be the number of days the Executive was employed during such
fiscal year and the denominator of which shall be 365, and (2) the
amount of any annual incentive compensation award the Company has
already paid to the Executive for the uncompleted fiscal year; and
the Company shall at its own cost continue the participation
of the Executive for a period of two years, in all medical, life and
other employee "welfare" benefit plans and programs (including, without
limitation, all qualified, non-qualified, and supplemental retirement
and welfare benefit plans) in which the Executive was entitled to
participate immediately prior to the Date of Termination, provided that
the Executive's continued participation is permitted under the terms
and provisions of such plans and programs as in effect on the date of
such Termination. In the event that the Executive's participation in
any such plan or program is barred, the Company shall arrange to
provide the Executive with benefits substantially similar to those
which the Executive would otherwise have been entitled to receive under
such plans and programs from which his continued participation is
barred; and
the Company shall, at its own cost, continue to provide the
Executive for a period of two years with the perquisites,
reimbursements and payments the Company gave or provided to the
Executive, pursuant to Section 5(d) of this Agreement, immediately
prior to the Date of Termination; and
the Company shall pay to the Executive (upon presentation of
appropriate invoices and other documentation) an amount equal to the
amount of all legal fees and expenses incurred by the Executive in
contesting, arbitrating or disputing any such termination or in seeking
to obtain or enforce any right or benefit provided by this Agreement;
PROVIDED that, such claim has been brought in good faith by the
Executive
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and if the Executive shall not be successful, the Executive shall
return 50% of the legal fees and expenses previously reimbursed to the
Executive by the Company; and
if the Company shall fulfill its obligations to the Executive
pursuant to this Section 7(d) then the Company shall, thereafter, have
no further obligations to the Executive under this Agreement.
The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 7 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 7 be reduced by any compensation earned by the Executive as the result
of employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
The obligations of the Company to make payments and provide
benefits under this Section 7 shall survive the termination of this Agreement.
TREATMENT OF PARACHUTE PAYMENTS.
Notwithstanding any other provisions of this Agreement, and
except as set forth below, in the event that any payment or benefit received or
to be received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any Person affiliated with
the Company or such Person) (all such payments and benefits, including the
Severance Payments, being hereinafter called "Total Payments") is determined to
be an "excess parachute payment" pursuant to Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor or substitute
provision of the Code, with the effect that Executive is liable for the payment
of the excise tax described in Code Section 4999 or any successor or substitute
provision of the Code (the "Excise Tax"), then, after taking into account any
reduction in the Total Payments provided by reason of Code Section 280G in such
other plan, arrangement or agreement, the cash payments provided in Section
7(d)(ii) of this Agreement shall first be reduced, and the noncash payments and
benefits shall thereafter be reduced, to the extent necessary so that no portion
of the Total Payments is subject to the Excise Tax; provided, however, that
Executive may elect (at any time prior to the payment of any Total Payment under
this Agreement) to have the noncash payments and benefits reduced (or
eliminated) prior to any reduction of the cash payments under this Agreement.
Notwithstanding the foregoing, payments or benefits under this Agreement will
NOT be reduced unless: (i) the net amount of the Total Payments, as so reduced
(and after subtracting the net amount of federal, state and local income taxes
on such reduced Total Payments) IS GREATER than (ii) the difference of (A) the
net amount of such Total Payments, without reduction (but after subtracting the
net amount of federal, state and local income taxes on such Total Payments),
minus (B) the amount of Excise Tax to which the Executive would be subject in
respect of such unreduced Total Payments.
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(b) All determinations required to be made under this Section
8, and the assumptions to be utilized in arriving at such determination, shall
be made by the certified public accounting firm used for auditing purposes by
the Company immediately prior to the Date of Termination (the "Accounting
Firm"), which shall provide detailed supporting calculations both to the Company
and the Executive not later than 5 days prior to the Date of Termination. The
Company shall pay all fees and expenses of the Accounting Firm. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive, except as provided in paragraph (c) below.
(c) As a result of the uncertainty in the application of Code
Sections 280G and 4999 at the time of the initial determination by the
Accounting Firm hereunder, it is possible that the Internal Revenue Service
("IRS") or other agency will claim that an Excise Tax, or a greater Excise Tax,
is due. If the Executive is required to make a payment of any such Excise Tax,
the Company will promptly pay the Executive an additional amount equal to the
amount, or greater amount, of Excise Tax the Executive is required to pay (plus
a gross up payment for any income taxes, interest, penalties or additional
Excise Tax payable by Executive with respect to such Excise Tax or additional
payment), as determined by the Accounting Firm. Executive will notify the
Company in writing of any claim by the IRS or other agency that, if successful,
would require payment by the Company of the additional payments under this
paragraph. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments. The Company shall pay all fees and expenses of the Executive
relating to a claim by the IRS or other agency.
RESTRICTIVE COVENANTS.
(a) COVENANT NOT TO COMPETE. The Executive acknowledges that,
as a key management employee, the Executive will be involved, on a high level,
in the development, implementation and management of the Company's strategies
and plans, including those which involve the Company's finances, research,
marketing, planning, operations, industrial relations and acquisitions, and that
he will have access to Confidential Information, as defined in Section 10. By
virtue of the Executive's unique and sensitive position and special background,
employment of the Executive by a competitor of the Company represents a serious
competitive danger to the Company, and the use of the Executive's talent and
knowledge and information about the Company's business, strategies and plans can
and would constitute a valuable competitive advantage over the Company. In view
of the foregoing, the Executive covenants and agrees that, if the Executive's
employment is terminated (i) by the Company in breach of this Agreement, (ii)
pursuant to an event constituting Good Reason or (iii) under any other
circumstances, then, for a period of two years in the case of clauses (i) and
(ii) of this sentence, and for a period of one year in the case of clause (iii)
of this sentence, after the Date of Termination (the "Non-Compete Period"), the
Executive will not engage or be engaged, in any capacity, directly or
indirectly, including but not limited to, as an employee, agent, consultant,
manager, executive, owner or stockholder (except as a passive investor holding
less than a 5%
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equity interest in any enterprise) in any business entity anywhere in North
America which is engaged in direct competition with any business of the Company
on the Date of Termination which had revenues of ten percent (10%) or more of
the Company's consolidated revenues for the four most completed fiscal quarters
(a business meeting this requirement shall be referred to as a "Competitor").
If any court determines that the covenant not to compete contained in
this Section 9, or any part hereof, is unenforceable, such court shall have the
power to reduce the duration or scope of such provision, or make any other
changes, provided that such changes are as close to the terms hereof as possible
and, in its reduced form, such provision shall then be enforceable.
(b) NON-SOLICITATION OF EMPLOYEES. Executive agrees that,
during the Non- Compete Period, he shall not, without the prior written consent
of the Company, solicit any current employee of the Company or any of its
subsidiaries, or any individual who becomes an employee at or before the Date of
Termination, to leave such employment and join or become affiliated with any
business that is, during the Non-Compete Period, a Competitor.
(c) SURVIVAL OF NON-COMPETE TERMS. The provisions set forth in
this Section 9 shall survive termination of this Agreement.
CONFIDENTIALITY. The Executive recognizes that he will have
access to confidential information, trade secrets, proprietary methods and other
data which are the property of and integral to the operations and success of
Company ("Confidential Information") and therefore agrees to be bound by the
provisions of this Section 10, which both Company and Executive agree and
acknowledge to be reasonable and to be necessary to the Company. In recognition
of this fact, the Executive agrees that the Executive will not disclose any
Confidential Information (except (i) information which becomes publicly
available without violation of this Agreement, (ii) information which the
Executive did not know and should not have known was disclosed to the Executive
in violation of any other person's confidentiality obligation and (iii)
disclosure required in connection with any legal process (after giving the
Company the opportunity to dispute such requirement)) to any person, firm,
corporation, association or other entity, for any reason or purpose whatsoever,
nor shall the Executive make use of any such information for the benefit of any
person, firm, corporation or other entity except the Company. The Executive's
obligation to keep all of such information confidential shall be in effect
during and for a period of two years after the Date of Termination; PROVIDED,
HOWEVER, that the Executive will keep confidential and will not disclose any
trade secret or similar information protected under law as intangible property
(subject to the same exceptions set forth in the parenthetical clause above) for
so long as such protection under law is extended.
BINDING AGREEMENT. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to him hereunder if he had
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continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the Executive's
estate.
NOTICE. Notices, demands and all other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered, if delivered personally, or (unless otherwise specified)
mailed by United States certified or regis-
tered mail, return receipt requested, postage prepaid, and when received if
delivered otherwise, addressed as follows:
If to the Executive:
Donald C. Mueller
314 South Lincoln
Hinsdale, Illinois 60521
If to the Company:
Transportation Technologies Industries, Inc.
980 North Michigan Avenue
Suite 1000
Chicago, Illinois 60611
Attn: Secretary
With a copy to:
Robert F. Wall, Esq.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
INDEMNIFICATION. Following the Executive's Date of
Termination, the Company will: (i) indemnify and hold harmless the Executive for
all costs, liability and expenses (including reasonable attorneys' fees) for all
acts and omissions of the Executive that relate to the Executive's employment
with the Company, to the maximum extent permitted by law; and (ii) continue the
Executive's coverage under the directors' and officers' liability coverage
maintained by the Company, as in effect from time to time, to the same extent as
other current or former senior executive officers and directors of the Company.
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<PAGE>
GENERAL PROVISIONS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer of the Company as
may be specifically designated by the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without regard
to its conflicts of law principles.
VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.
COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agree-
ment of the parties hereto in respect of the subject matter contained herein is
hereby terminated and canceled.
IRREPARABLE HARM. The Executive acknowledges that: (i) the
Executive's compliance with this Agreement is necessary to preserve and protect
the proprietary rights, Confidential Information and the goodwill of the Company
and its subsidiaries as going concerns; (ii) any failure by the Executive to
comply with the provisions of this Agreement will result in irreparable and
continuing injury for which there will be no adequate remedy at law; and (iii)
in the event that the Executive should fail to comply with the terms and
conditions of this Agreement, the Company shall be entitled, in addition to such
other relief as may be proper, to all types of equitable relief (including, but
not limited to, the issuance of an injunction and/or temporary restraining
order) as may be necessary to cause the Executive to comply with this Agreement,
to restore to the Company its property, and to make the Company whole.
CONSENT TO JURISDICTION AND FORUM; LEGAL FEES AND COSTS. The
Company and the Executive hereby expressly and irrevocably agree that any
action, whether at law or in equity, arising out of or based upon this Agreement
or the Executive's employment by the Company shall only be brought in a federal
or state court located in Chicago, Illinois. The Executive hereby irrevocably
consents to personal jurisdiction in such court and to accept service of process
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<PAGE>
in accordance with the provisions of such court. Except as provided in Section
7(d)(v), in connection with any dispute arising out of or based upon this
Agreement or the Executive's employment by the Company, each party shall be
responsible for its or his own legal fees and expenses and all court costs shall
be shared equally by the Company and the Executive unless the court apportions
such legal fees or court costs in a different manner.
WITHHOLDING. All payments made to the Executive pursuant to
this Agreement shall be subject to applicable withholding taxes, if any, and any
amount so withheld shall be deemed to have been paid to the Executive for
purposes of amounts due to the Executive under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
- --------------------------------
DONALD C. MUELLER
By:___________________________________
Name:
Title:
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<PAGE>
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