Exhibit 10.5
Employment
Agreement
This
Employment Agreement (the “ Agreement ”) dated
as of April 18, 2003, and effective as of the signing date of
the Stock Purchase Agreement (the “ Effective Date
”), is made by and between United Aftermarket, Inc. (together
with any successor thereto, the “ Company ”) and
Bruce Zorich (the “ Executive ”).
RECITALS
| A. |
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It is the desire of the Company to
assure itself of the services of the Executive by engaging the
Executive to perform services under the terms hereof. |
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| B. |
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The Executive desires to provide
services to the Company on the terms herein provided. |
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below the parties hereto agree
as follows:
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(a) |
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“ Annual Base Salary
” shall have the meaning set forth in
Section 3(a). |
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(b) |
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“ Board ” shall
mean the Board of Directors of the Company. |
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(c) |
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The Company shall have “
Cause ” to terminate the Executive’s employment
hereunder upon: |
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(i) |
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the Executive’s
failure to use his reasonable best efforts to follow a legal
written order of the Board, other than any such failure resulting
from the Executive’s Disability, and such failure is not
remedied within 30 days after receipt of notice; |
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(ii) |
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Executive’s
gross or willful misconduct with regard to the Company; |
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(iii) |
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Executive’s
conviction of a felony or crime involving material
dishonesty; |
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(iv) |
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Executive’s
fraud or personal dishonesty involving the Company’s assets
(but excluding expense reimbursement disputes as to which Executive
had a reasonable good faith belief that his conduct was within the
policies of the Company); or |
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(v) |
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the Executive’s
unlawful use (including being under the influence) or possession of
illegal drugs on the Company’s premises or while performing
the Executive’s duties and responsibilities under this
Agreement. |
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(d) |
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“ Company ” shall
have the meaning set forth in the preamble hereto. |
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(e) |
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“ Compensation
Committee ” means the Compensation Committee of the
Board. |
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(f) |
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“ Closing
Date ” shall have the meaning set forth in the Stock
Purchase Agreement. |
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(g) |
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“ Date of
Termination ” shall mean (i) if the
Executive’s employment is terminated by his death, the date
of his death; (ii) if the Executive’s employment is
terminated pursuant to Section 4(a)(ii) – (vi) either
the date indicated in the Notice of Termination or the date
specified by the Company pursuant to Section 4(b) ,
whichever is earlier; (iii) if the Executive’s
employment is terminated pursuant to Section 4(a)(vii)
or Section 4(a)(viii) , the expiration of the
then-applicable Term. |
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(h) |
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“
Disability ” shall mean the absence of the Executive
from the Executive’s duties to the Company on a full-time
basis for a total of six months during any 12-month period as a
result of incapacity due to mental or physical illness which is
determined to be reasonably likely to extend beyond the completion
of the Term and which determination is made by a physician selected
by the Company and acceptable to the Executive or the
Executive’s legal representative (such agreement as to
acceptability not to be withheld unreasonably). A Disability shall
not be “incurred” hereunder until, at the earliest, the
last day of the sixth month of such absence. |
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(i) |
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“ Executive
” shall have the meaning set forth in the preamble
hereto. |
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(j) |
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“ Executive
Bonus Plan ” shall have the meaning set forth in
Section 3(b) . |
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(k) |
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(i) |
The Executive shall have “
Good Reason ” to resign his employment upon the
occurrence of any of the following: |
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(A) failure
of the Company to continue the Executive in the position of Chief
Executive Officer; |
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(B) a
material diminution in the nature of scope of the Executive’s
responsibilities, duties or authority; |
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(C) failure
of the Principal Shareholders to satisfy their requirements under
Section 2(c)(ii) of the Agreement |
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(D) failure
of the Company to make any payment or provide any benefit under
this Agreement; |
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(E) the
Company’s material breach of this Agreement; |
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(F) failure
of any successor to the Company to assume the obligations of the
Company hereunder; or |
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(G) requirement by the
Company to relocate the Executive’s place of residence
outside of the Greater Atlanta area at any time prior to the second
anniversary of the Effective Date. |
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(ii) |
The Executive may not
resign his employment for Good Reason unless: |
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(A) the
Executive provided the Company with at least 30 days prior written
notice of his intent to resign for Good Reason; and |
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(B) the
Company has not remedied the alleged violation(s) within the 30-day
period. |
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(l) |
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“ Interim Period
” shall have the meaning set forth in Section 3(b)(i)
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(m) |
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“ Inventions ”
shall have the meaning set forth in Section 8
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(n) |
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“ Notice of Termination
” shall have the meaning set forth in
Section 4(b) . |
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(o) |
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“ Outside Closing Date
” shall mean the later to occur of (i) October 31, 2003
or (ii) a date selected by the Principal Stockholders in their
sole discretion. |
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(p) |
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“ Principal
Stockholders ” shall mean Carlyle Partners III, L.P. a
Delaware limited partnership and its affiliates. |
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(q) |
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“ Stock Purchase
Agreement ” shall mean the contemplated Stock Purchase
Agreement by and among UIS Industries, Inc., UIS, Inc. and United
Aftermarket, Inc. |
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(r) |
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“ Term ” shall
have the meaning set forth in Section 2(b)
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(a) |
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The Company shall employ the
Executive and the Executive shall enter the employ of the Company,
for the period set forth in Section 2(b) , in the
position set forth in Section 2(c) , and upon the other
terms and conditions herein provided. |
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(b) |
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The initial term of employment under
this Agreement (the “ Initial Term ”) shall be
for the period beginning on the Effective Date of this Agreement
and ending on the third anniversary thereof, unless earlier
terminated as provided in Section 4 . The employment
term hereunder shall automatically be extended for successive
one-year periods (“ Extension Terms ” and,
collectively with the Initial Term, the “ Term
”) unless either party gives notice of non-extension to the
other no later than 90 days prior to the expiration of the
then-applicable Term. |
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(c) |
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Position and Duties
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(i) The
Executive shall serve as Chief Executive Officer of the Company and
shall have the authorities duties and responsibilities
customarily |
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commensurate with such position and
such additional customary responsibilities, duties and authority as
may from time to time be reasonably assigned to the Executive by
the Board. The Executive shall report to the Board. The Executive
shall devote substantially all his working time and efforts to the
business and affairs of the Company. The Executive agrees to
observe and comply with the Company’s rules and policies as
adopted by the Company from time to time. During the Term, it shall
not be a violation of this Agreement for the Executive to
(i) serve on industry trade, civic or charitable boards or
committees; (ii) deliver lectures or fulfill speaking
engagements; or (iii) manage personal investments, as long as
such activities do not materially interfere with the performance of
the Executive’s duties and responsibilities. The Executive
shall be permitted to serve on for-profit corporate boards of
directors and advisory committees if approved in advance by the
Board. |
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(ii) As
of the Effective Date, the Principal Stockholders shall cause the
Executive to be appointed or elected to the Board. During the Term,
the Board shall propose the Executive for re-election to the Board
and the Principal Stockholders shall vote all of their shares of
Common Stock in favor of such re-election. |
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Compensation and Related
Matters. |
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(a) |
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Annual Base Salary . During
the portion of the Term which follows the Closing Date, the
Executive shall receive a base salary at a rate of $375,000 per
annum, which shall be paid in accordance with the customary payroll
practices of the Company, subject to any increase as determined by
the Compensation Committee in its sole discretion (the “
Annual Base Salary ”). Annual Base Salary may be
increased, but not decreased, from time to time by the
Board. |
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(b) |
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Interim Period . During the
period between the Effective Date and the Closing Date (“
Interim Period ”), |
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(i) for
the period after the last date with respect to which Executive is
entitled to receive periodic salary payments from his previous
employer, Executive shall accrue salary at the rate of his Annual
Base Salary with such accrued amount to be paid in a lump sum on
the earlier of the Closing Date or the Outside Closing
Date; |
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(ii) the
Company shall reimburse Executive for any premiums paid in
connection with the Executive’s election to receive COBRA
continuation health care coverage from his previous employer,
provided , however , that such reimbursement shall
cease once the Executive becomes eligible for coverage under the
Company’s medical benefit plan; |
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(iii) the
Company shall reimburse Executive for any reasonable premiums paid
in connection with the Executive’s purchase of a one-year
term life insurance policy that would pay the Executive’s
beneficiary $1 million upon |
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the death of the Executive during
any period prior to the Executive becoming eligible for any amount
of life insurance coverage under the Company’s applicable
life insurance plan. Upon Executive becoming so eligible, he shall
cancel such policy and return the refunded premium to the Company;
and |
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(iv) the
Company shall reimburse Executive for any reasonable premiums paid
in connection with the Executive’s purchase of a long-term
disability insurance policy that would pay the Executive a monthly
benefit up to 60% of one-twelfth of his Annual Base Salary (subject
to a reasonable maximum monthly benefit) in the event the Executive
becomes disabled as defined under such policy, during any period
prior to the Executive becoming eligible for any long-term
disability coverage under the Company’s applicable long-term
disability insurance plan. Upon Executive becoming so eligible, he
shall cancel such policy and return the refunded premium to the
Company. |
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The Principal Stockholder shall make
any payments described in this Section 3(b) that the Company
is unable to make. |
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(c) |
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Annual Bonus . During the
Term, the Executive will participate in an annual performance-based
bonus plan (“ Executive Bonus Plan ”)
established by the Compensation Committee at a target level of 60%
of his Annual Base Salary (“ Target Level ”),
and a maximum of 150% of Annual Base Salary. Such bonus shall be
payable at such time as bonuses are paid to other senior executive
officers who participate therein. Notwithstanding the foregoing,
with respect to each of the Company’s fiscal years that ends
during the Term, the amount of the Executive’s annual bonus
payable pursuant to such plan shall be determined as set forth on
Exhibit A . With respect to the fiscal year ending
December 31, 2003, the Executive shall be eligible to receive
the greater of (i) a prorated portion of his annual bonus
based on the number of days the Executive was employed by the
Company during such fiscal year or (ii) $100,000, provided ,
however , that such bonus shall not be paid prior to the
earlier to occur of (A) the Closing Date or (B) the
Outside Closing Date. |
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(d) |
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Equity Participation . During
the Term, the Executive shall be entitled to participate in the
Stock Option Plan of Company and on the Effective Date shall be
granted options, to purchase two percent of the Company’s
common stock (“ Common Stock ”) at an exercise
price per share equal to the per share cost paid by the Principal
Shareholders to acquire the Company. The grant of stock options
shall be governed by the terms of the Stock Option Plan and Stock
Option Agreement (attached hereto as Exhibit B and
Exhibit C , respectively). |
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(e) |
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Benefits . The Executive
shall be entitled to participate in employee benefit plans,
programs and arrangements of the Company which are applicable to
the senior officers of the Company at a level commensurate with the
Executive’s position. |
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(f) |
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Relocation Expenses . If the
Company requires the Executive to relocate his place of residence
outside of the Greater Atlanta area whether before or after the
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anniversary of the Effective Date,
the Company shall reimburse Executive for any of the following
expenses to the full extent reasonable: (i) real estate broker
commissions and attorney fees associated with the sale of his
former residence and purchase of a new residence, (ii) moving
expenses (as defined in Section 217(b) of the Internal Revenue
Code (the “ Code ”)), and (iii) to the
extent approved by the Board, necessary temporary lodging for the
Executive and his family, provided that the Executive shall
properly account for such expenses in accordance with the
Company’s policies and procedures. |
The
Executive’s employment hereunder may be terminated by the
Company or the Executive, as applicable, without any breach of this
Agreement only under the following circumstances:
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(i) |
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Death . The
Executive’s employment hereunder shall terminate upon his
death. |
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(ii) |
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Disability . If
the Executive has incurred a Disability, the Company may give the
Executive written notice of its intention to terminate the
Executive’s employment. In that event, the Executive’s
employment with the Company shall terminate effective on the 30
th day after receipt of such notice by the Executive,
provided that within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of his
duties. |
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(iii) |
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Termination for
Cause . The Company may terminate the Executive’s
employment for Cause. |
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(iv) |
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Termination without
Cause . The Company may terminate the Executive’s
employment without Cause. |
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(v) |
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Resignation for
Good Reason . The Executive may resign his employment for Good
Reason. |
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(vi) |
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Resignation without
Good Reason . The Executive may resign his employment without
Good Reason. |
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(vii) |
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Non-extension of
Term by the Company . The Company may give notice of
non-extension to the Executive pursuant to
Section 2(b). |
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(viii) |
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Non-extension of
Term by the Executive . The Executive may give notice of
non-extension to the Company pursuant to
Section 2(b). |
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(ix) |
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Failure to
Close . The Executive’s employment hereunder shall
terminate in the event that the Closing Date does not occur prior
to the Outside Closing Date. |
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Notice of Termination . Any
termination of the Executive’s employment by the Company or
by the Executive under this Section 4 (other than
termination pursuant to paragraph (a)(i)and (a)(ix)) shall be
communicated by a written notice to the other party hereto
indicating the specific termination provision in this Agreement
relied upon, setting 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, and
specifying a Date of Termination which, if submitted by the
Executive, shall be at least 30 days following the date of
such notice (a “ Notice of Termination ”)
provided, however, that the Company may, in its sole discretion,
change the Date of Termination to any date following the
Company’s receipt of the Notice of Termination. A Notice of
Termination submitted by the Company may provide for a Date of
Termination on the date the Executive receives the Notice of
Termination, or any date thereafter elected by the Company in its
sole discretion. The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Cause or Good Reason shall not waive
any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance
in enforcing the Executive’s or the Company’s rights
hereunder. |
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Company obligations upon
termination . Upon termination of the Executive’s
employment, the Executive (or the Executive’s estate) shall
be entitled to receive a lump sum equal to the Executive’s
Annual Base Salary through the Date of Termination not theretofore
paid, any bonus if declared or earned but not yet paid for a
completed fiscal year, any expenses owed to the Executive, any
accrued vacation pay owed to the Executive, and any amount arising
from the Executive’s participation in, or benefits under any
employee benefit plans, programs or arrangements, which amounts
shall be payable in accordance with the terms and conditions of
such employee benefit plans, programs or arrangements. |
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(a) |
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Termination for Cause,
Resignation without Good Reason or upon Non-extension by the
Executive . If the Executive’s employment shall terminate
pursuant to Sections 4(a)(iii) for Cause, Section
4(a)(vi) without Good Reason, or pursuant to
Sections 4(a)(viii) due to Non-extension of the
Agreement by the Executive, the Executive shall not be entitled to
any severance payment or benefits (other than as expressly provided
for herein or under any benefit plan). |
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(b) |
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Termination upon death or
Disability . If the Executive’s employment shall
terminate pursuant to Sections 4(a)(i) due to the
Executive’s death, or pursuant to
Section 4(a)(ii) due to the Executive’s
Disability, the Company shall pay to the Executive (or the
Executive’s estate): |
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(i) |
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in accordance with the
Company’s regular payroll practice following the Date of
Termination, an amount equal to the Annual Base Salary that the
Executive would have been entitled to receive if the Executive had
continued his employment for a period of six months following the
Date of Termination; and |
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(ii) |
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a prorated amount of
the Executive’s annual bonus based on the Company’s
year-to-date performance through the Date of Termination
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