-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ICkZz5XbuJUKoZIOEJRKuv1LHOwJgylEr9SCts2Xy4nUmNFbz0w9OkH9Xl1zSK+c fNkdMzjfaTeKjY2t0b2Cfw== 0000950131-02-002039.txt : 20020515 0000950131-02-002039.hdr.sgml : 20020515 20020515143448 ACCESSION NUMBER: 0000950131-02-002039 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMCOL INTERNATIONAL CORP CENTRAL INDEX KEY: 0000813621 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 360724340 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14447 FILM NUMBER: 02651027 BUSINESS ADDRESS: STREET 1: 1500 W SHURE DR CITY: ARLINGTON HEIGHTS STATE: IL ZIP: 60004-7803 BUSINESS PHONE: 8473948730 MAIL ADDRESS: STREET 1: 1500 W SHURE DR CITY: ARLINGTON HEIGHTS STATE: IL ZIP: 60004-7803 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN COLLOID CO DATE OF NAME CHANGE: 19920703 10-Q 1 d10q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 ---------------------------------------------- or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------- ----------------------- Commission file number 0-15661 ------------------------------------------------------- AMCOL INTERNATIONAL CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 36-0724340 - --------------------------------------- -------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1500 West Shure Drive, Suite 500, Arlington Heights, Illinois 60004-7803 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (847) 394-8730 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 7, 2002 - ------------------------------------ ----------------------------------- (Common stock, $.01 par value) 28,519,982 AMCOL INTERNATIONAL CORPORATION INDEX Page No. -------- Part I - Financial Information - ------------------------------ Item 1 Financial Statements Condensed Consolidated Balance Sheets - March 31, 2002 and December 31, 2001 1 Condensed Consolidated Statements of Operations - three months ended March 31, 2002 and 2001 2 Condensed Consolidated Statements of Comprehensive Income - three months ended March 31, 2002 and 2001 4 Condensed Consolidated Statements of Cash Flows - three months ended March 31, 2002 and 2001 5 Notes to Condensed Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3 Quantitative and Qualitative Disclosures About Market Risk 14 Part II - Other Information - --------------------------- Item 6 Exhibits and Reports on Form 8-K 14 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
- --------------------------------------------------------------------------------------- ASSETS March 31, December 31, 2002 2001 (unaudited) - --------------------------------------------------------------------------------------- Current assets: Cash $ 8,503 $ 10,320 Accounts receivable, net 40,473 43,641 Inventories 34,600 34,593 Prepaid expenses 4,582 4,419 Net current assets of discontinued operations 798 798 Current deferred tax assets 4,288 4,286 Income taxes receivable 3,010 3,120 --------- --------- Total current assets 96,254 101,177 --------- --------- Investment in and advances to joint ventures 13,423 13,219 --------- --------- Property, plant, equipment, and mineral rights and reserves: Land and mineral rights and reserves 8,994 9,293 Depreciable assets 184,214 181,120 --------- --------- 193,208 190,413 Less: accumulated depreciation 121,879 118,065 --------- --------- 71,329 72,348 --------- --------- Other assets: Goodwill and other intangible assets, net 368 403 Long-term prepayments and other assets 7,503 4,410 Net non-current assets of discontinued operations 311 311 Deferred tax assets 4,437 4,462 --------- --------- 12,619 9,586 --------- --------- $ 193,625 $ 196,330 ========= ========= - --------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31, 2002 2001 - --------------------------------------------------------------------------------------- Current liabilities: Accounts payable $ 7,782 $ 9,239 Accrued liabilities 18,017 21,844 --------- --------- Total current liabilities 25,799 31,083 --------- --------- Long-term debt 15,458 13,245 --------- --------- Minority interests in subsidiaries 775 523 Other liabilities 11,389 10,752 --------- --------- 12,164 11,275 --------- --------- Stockholders' equity: Common stock 320 320 Additional paid in capital 70,286 71,905 Retained earnings 91,122 91,018 Cumulative other comprehensive loss (3,072) (2,688) --------- --------- 158,656 160,555 Less: Treasury stock 18,452 19,828 --------- --------- 140,204 140,727 --------- --------- $ 193,625 $ 196,330 ========= ========= - ---------------------------------------------------------------------------------------
Condensed from audited financial statements. The accompanying notes are an integral part of these condensed consolidated financial statements. 1 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands)
- ------------------------------------------------------------------------------------------ Three Months Ended March 31, ------------------ 2002 2001 - ------------------------------------------------------------------------------------------ Continuing Operations Net sales $ 57,341 $ 64,378 Cost of sales 44,688 49,321 -------- -------- Gross profit 12,653 15,057 General, selling and administrative expenses 12,030 11,923 -------- -------- Operating profit 623 3,134 -------- -------- Other income (expense): Investment income -- 2,150 Change in value of interest rate swap -- (316) Interest expense, net (92) (771) Other, net (30) 75 -------- -------- (122) 1,138 -------- -------- Income before income taxes and equity in income of joint ventures 501 4,272 Income tax expense 176 1,350 -------- -------- Income before equity in income of joint ventures 325 2,922 Income from joint ventures 204 132 Minority interest in net loss of subsidiary 3 -- -------- -------- Income from continuing operations 532 3,054 -------- -------- Discontinued Operations Loss from operations (net of income taxes) -- (142) -------- -------- Cummulative effect of change in accounting principle (net of taxes) -- (182) -------- -------- Net income $ 532 $ 2,730 ======== ======== - ------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated financial statements. 2 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
- -------------------------------------------------------------------------------------------- Three Months Ended March 31, ------------------ 2002 2001 - -------------------------------------------------------------------------------------------- Weighted average common shares outstanding 28,454,530 28,664,185 =========== =========== Weighted average common and common equivalent shares outstanding 30,921,786 31,221,631 =========== =========== Basic earnings (loss) per share: Continuing operations $ 0.02 $ 0.11 ----------- ----------- Discontinued operations - loss from operations -- (0.01) ----------- ----------- Cummulative effect of change in accounting principle -- (0.01) ----------- ----------- Net income $ 0.02 $ 0.09 =========== =========== Diluted earnings (loss) per share: Continuing operations $ 0.02 $ 0.10 ----------- ----------- Discontinued operations - loss from operations -- (0.01) ----------- ----------- Cummulative effect of change in accounting principle -- (0.01) ----------- ----------- Net income $ 0.02 $ 0.08 =========== =========== Dividends declared per share $ 0.015 $ 0.010 =========== =========== - --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In thousands) - ------------------------------------------------------------------------------- Three Months Ended March 31, ------------------- 2002 2001 - ------------------------------------------------------------------------------- Net income $ 532 $ 2,730 Other comprehensive income (loss): Foreign currency translation adjustment (384) (2,684) ------- ------- Comprehensive income $ 148 $ 46 ======= ======= - ------------------------------------------------------------------------------- The accompanying notes are an integral part of these condensed consolidated financial statements. 4 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
- ----------------------------------------------------------------------------------------------------------- Three Months Ended March 31, ---------------------- 2002 2001 - ----------------------------------------------------------------------------------------------------------- Cash flow from operating activities: Income from continuing operations $ 532 $ 3,054 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation, depletion, and amortization 4,152 4,185 Change in value of interest rate swap -- 316 Other 903 188 Decrease in current assets 2,866 4,790 Decrease in current liabilities (5,285) (4,207) --------- --------- Net cash provided by operating activities of continuing operations 3,168 8,326 --------- --------- Net cash used in discontinued operations -- (1,448) --------- --------- Cash flow from investing activities: Tax payments related to the absorbent polymers segment sale -- (125,477) Acquisition of land, mineral reserves, and depreciable assets (3,366) (1,382) Other (3,412) (2,088) --------- --------- Net cash used in investing activities (6,778) (128,947) --------- --------- Cash flow from financing activities: Net change in outstanding debt 2,213 3,252 Proceeds from sales of treasury stock 877 1,200 Purchases of treasury stock (1,120) (5,119) Cummulative effect of change in accounting principle (net of tax) -- (182) Dividends paid (429) (288) Other 252 -- --------- --------- Net cash provided by (used in) financing activities 1,793 (1,137) --------- --------- Net decrease in cash and cash equivalents (1,817) (123,206) Cash and cash equivalents at beginning of period 10,320 176,750 --------- --------- Cash and cash equivalents at end of period $ 8,503 $ 53,544 ========= ========= Supplemental disclosures of cash flow information: Cash paid for: Interest $ 1,074 $ 753 ========= ========= Income taxes $ 1,569 $ 126,157 ========= ========= - -----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands) Note 1: BASIS OF PRESENTATION The financial information included herein, other than the condensed consolidated balance sheet as of December 31, 2001, has been prepared by management and are unaudited. The condensed consolidated balance sheet as of December 31, 2001, has been derived from, but does not include all the disclosures contained in, the audited consolidated financial statements for the year ended December 31, 2001. The information furnished herein includes all adjustments which are, in the opinion of management, necessary for a fair statement of the results of the interim period, and all such adjustments are of a normal recurring nature. Management recommends the accompanying condensed consolidated financial information be read in conjunction with the consolidated financial statements and related notes included in the Company's 2001 Form 10-K which accompanies the 2001 Corporate Report. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Certain items in the 2001 condensed consolidated financial statements have been reclassified to comply with the presentation for 2002. Note 2: INVENTORIES Inventories at March 31, 2002 have been valued using the same methods as at December 31, 2001. The composition of inventories at March 31, 2002 and December 31, 2001, was as follows: - -------------------------------------------------------------------------------- March 31, December 31, 2002 2001 - -------------------------------------------------------------------------------- Advance mining $ 2,248 $ 1,872 Crude stockpile inventories 11,758 11,524 In-process inventories 12,692 11,498 Other raw material, container, and supplies inventories 7,902 9,699 ------- ------- $34,600 $34,593 ======= ======= - -------------------------------------------------------------------------------- 6 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3: EARNINGS PER SHARE Basic earnings per share were computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share were computed by dividing the net income by the weighted average common shares outstanding after consideration of the dilutive effect of stock options outstanding during of each period.
- ------------------------------------------------------------------------------------------------ Three Months Ended March 31, ----------------------- 2002 2001 - ------------------------------------------------------------------------------------------------ Weighted average of common shares outstanding 28,454,530 28,664,185 Dilutive impact of stock options 2,467,256 2,557,446 ---------- ---------- Weighted average of common and common equivalent shares for the period 30,921,786 31,221,631 ========== ========== Common shares outstanding 28,555,026 27,892,306 ========== ========== - ------------------------------------------------------------------------------------------------
Note 4: BUSINESS SEGMENT INFORMATION The Company operates in two major industry segments: minerals and environmental. The Company also operates a transportation business. The minerals segment mines, processes and distributes clays and products with similar applications to various industrial and consumer markets. The environmental segment processes and distributes clays and products with similar applications for use as a moisture barrier in commercial construction, landfill liners and in a variety of other industrial and commercial applications. The transportation segment includes a long-haul trucking business and a freight brokerage business, which provide services to both the Company's plants and outside customers. The Company identifies segments based on management responsibility and the nature of the business activities of each component of the Company. Intersegment sales are insignificant, other than intersegment shipping, which is disclosed in the following table. The Company measures segment profit based on operating profit. Operating profit is defined as sales less cost of sales and general, selling and administrative expenses related to a segment's operations. The costs deducted to arrive at operating profit do not include interest or income taxes. Segment assets are those assets used in the Company's operations in that segment. Corporate assets include cash and cash equivalents, corporate leasehold improvements, the nanocomposite plant investment and other miscellaneous equipment. 7 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following summaries set forth certain financial information by business segment as of and for the three months ended March 31, 2002 and 2001. - -------------------------------------------------------------------------------- Three Months Ended March 31, --------------------------- 2002 2001 - -------------------------------------------------------------------------------- Business Segment: Revenues: Minerals $ 33,690 $ 38,837 Environmental 18,493 20,113 Transportation 7,384 7,562 Intersegment shipping (2,226) (2,134) --------- --------- Total $ 57,341 $ 64,378 ========= ========= Operating profit (loss): Minerals $ 2,217 $ 3,677 Environmental 939 2,680 Transportation 226 307 Corporate (2,759) (3,530) --------- --------- Total $ 623 $ 3,134 ========= ========= March 31, 2002 December 31, 2001 ============== ================= Assets: Minerals $ 105,985 $ 106,391 Environmental 60,788 65,216 Transportation 1,830 1,282 Corporate 23,913 22,332 Discontinued operations 1,109 1,109 --------- --------- Total $ 193,625 $ 196,330 ========= ========= - -------------------------------------------------------------------------------- Note 5: DERIVATIVES From time to time, the Company uses financial derivatives, principally swaps, forward contracts and options, in its management of foreign currency and interest rate exposures. These contracts hedge transactions and balances for periods consistent with committed exposures. The Company uses variable rate credit facilities to finance its operations. These debt obligations expose the Company to variability in interest payments due to changes in interest rates. If interest rates increase, interest expense increases. Conversely, if interest rates decrease, interest expense also decreases. Through June 15, 2001 the company was a party to an interest rate swap agreement with a bank in the notional amount of $15 million. The agreement gave the bank an option to extend the term. The interest rate swap agreement changed the variable rate cash flow exposure on a portion of the Company's borrowings under its committed credit facilities to fixed rate cash flows. 8 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The agreement called for the Company to make fixed rate payments and to receive variable rate cash flows based on the notional amount. This means the Company received funds if the variable rate (LIBOR) increased above the fixed rate, and paid the other party if LIBOR decreased below the fixed rate during the term of the agreement. Interest rate differentials were paid or received on a quarterly basis. Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and for Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities. It is the Company's judgement that SFAS No. 133 requires the Company to record the change in value of this agreement in its operating results in the period of change. Accordingly, the Company recognized the fair value of the swap and the option as of January 1, 2001 by recording the cumulative effect of a change in accounting principle in the amount of $182 (net of the related income tax benefit of $115) in the accompanying condensed consolidated statements of operations. The change in the fair value of the swap and option during the period through March 31, 2001 of $316 has been reflected in operating results for the period. Note 6: DISCONTINUED OPERATIONS In 2000 the Company announced its intention to close its U.K. cat litter business. Certain assets used in the business were sold to various outside parties for cash proceeds of $720. The closure was completed in 2001. The U.K. cat litter business was a component of the Company's minerals segment. The consolidated financial statements have been reclassified to report separately the net assets and operating results of the U.K. metalcasting and cat litter business for all periods presented. Summary operating results for 2001 were as follows: - -------------------------------------------------------------------------------- Three Months Ended U.K. metalcasting and cat litter businesses March 31, ------------------ 2001 - -------------------------------------------------------------------------------- Net sales $ 2,800 Operating loss (359) Income tax benefit (59) Net loss (142) - -------------------------------------------------------------------------------- 9 Item 2: AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Company's financial position and operating results during the periods included in the accompanying condensed consolidated financial statements. Three Months Ended March 31 2002 vs. 2001 ----------------------------------------- Net sales for the three month period were $57.3 million, which represented a decrease of $7.0 million, or 10.9% from 2001 levels. Approximately 73% of the decline was attributed to the lower pricing and volumes in the Company's domestic minerals business units. Lower sales in the environmental segment's offshore and European business units accounted for the remainder of the decrease. Gross profit declined by $2.4 million, or 16.7%, to $12.7 million in the first quarter of 2002. Approximately 52% of the decline was attributed to the minerals segment and 48% to the environmental segment. Gross margin for the period was 22.1% compared to 23.4% in the previous year's period. General, selling and administrative expenses remained relatively flat at $12.0 million. Increases in minerals, environmental and transportation segment expenses were offset by a decline in corporate costs. The Company increased its allocation of information technology expenses from its corporate segment to its operating segments in the 2002 period. This accounted for a majority of the decrease in corporate expenses. Operating profit for the period was $623 thousand which was a decrease of $2.5 million, or approximately 80%, from the first quarter of 2001. The decline followed the decrease in sales and gross profit. Investment income of $2.2 million in the first quarter of 2001 was attributed to the temporary investment of the remaining proceeds from the sale of the absorbent polymers segment which was sold in June 2000. The Company utilized these proceeds to reduce its long-term debt in September of 2001. Consequently, interest expense in the first quarter of 2002 declined by $679 thousand from the prior year quarter, or 88%, to $92 thousand. In the first quarter of 2001 the Company recorded a loss of $316 thousand due to the change in value of an interest rate swap contract. The loss was recognized under the new requirements of Statement on Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and for Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities. The Company also reported a loss on the cumulative effect of a change in accounting principle of $182 thousand in the first quarter of 2001 that was associated with implementation of this accounting pronouncement. The loss from discontinued operations reported in the first quarter of 2001 reflects the net loss incurred, after income taxes, in the UK metalcasting and cat litter businesses. The UK metalcasting and cat litter businesses were disposed of in the fourth quarter and first quarter of 2001, respectively. 10 Net income for the first quarter of $532 thousand compared with $2.7 million in the prior year period. The decline was primarily attributed to lower operating profit in the current year period and the net interest income realized in the prior year period.
- -------------------------------------------------------------------------------------- Minerals Quarter Ended March 31, -------------------------------------------------------- 2002 2001 2002 vs. 2001 - ----------------------------------------------- ------------------ ------------------- (Dollars in Thousands) - ----------------------------------------------- ------------------ ------------------- Product sales $31,060 92.2% $33,868 87.2% Shipping revenue 2,630 7.8% 4,969 12.8% ------- ----- ------- ----- Net sales 33,690 100.0% 38,837 100.0% (5,147) (13.3%) ------- ----- ------- ----- Cost of sales - product 25,491 75.7% 27,047 69.6% Cost of sales - shipping 2,630 7.8% 4,969 12.8% ------- ----- ------- ----- Cost of sales 28,121 83.5% 32,016 82.4% ------- ----- ------- ----- Gross profit 5,569 16.5% 6,821 17.6% (1,252) (18.4%) General, selling and administrative expenses 3,352 9.9% 3,144 8.1% 208 6.6% ------- ----- ------- ----- ------ Operating profit 2,217 6.6% 3,677 9.5% (1,460) (39.7%) - --------------------------------------------------------------------------------------
The decrease in net sales was primarily attributed to lower pricing in the pet products business, lower shipments to the domestic oil drilling market and lower exports from the domestic minerals unit. Reduced gross profit from the prior year period was caused by the decrease in sales. General, selling and administrative expenses increased primarily due to increased information technology costs and increased research and market development costs associated with the segment's health and beauty solutions business.
- --------------------------------------------------------------------------------------- Environmental Quarter Ended March 31, --------------------------------------------------------- 2002 2001 2002 vs. 2001 - ------------------------------------------------ -------------------- ----------------- (Dollars in Thousands) - ------------------------------------------------ -------------------- ----------------- Product sales $17,220 93.1% $18,869 93.8% Shipping revenue 1,273 6.9% 1,244 6.2% ------- ----- ------- ----- Net sales 18,493 100.0% 20,113 100.0% (1,620) -8.1% ------- ----- ------- ----- Cost of sales - product 10,919 59.0% 11,433 56.8% Cost of sales - shipping 1,273 6.9% 1,244 6.2% ------- ----- ------- ----- Cost of sales 12,192 65.9% 12,677 63.0% Gross profit 6,301 34.1% 7,436 37.0% (1,135) -15.3% General, selling and administrative expenses 5,362 29.0% 4,756 23.6% 606 12.7% ------- ----- ------- ----- ------ Operating profit (loss) 939 5.1% 2,680 13.3% (1,741) -65.0% - ---------------------------------------------------------------------------------------
The decline in sales was associated with lower revenues from the segment's offshore and European business units. Gross profit decreased in conjunction with lower sales and higher unit production costs at the European business unit. General, selling and administrative expenses increased due to higher information technology costs, additional marketing and promotion costs, and increased research and development spending. 11 - ------------------------------------------------------------------------------- Transportation Quarter Ended March 31, --------------------------------------------------- 2002 2001 2002 vs. 2001 - -------------------------------------------- ----------------- ---------------- (Dollars in Thousands) - -------------------------------------------- ----------------- ---------------- Net sales $7,384 100.0% $7,562 100.0% $ (178) (2.4%) Cost of sales 6,601 89.4% 6,759 89.4% ------ ----- ------ ----- Gross profit 783 10.6% 803 10.6% (20) (2.5%) General, selling and administrative expenses 557 7.5% 496 6.6% 61 12.3% ------ ----- ------ ----- ------ Operating profit 226 3.1% 307 4.1% (81) (26.4%) - ------------------------------------------------------------------------------- Net sales declined due to lower customer shipments. Increased general, selling and administrative expenses were associated with higher information technology costs. - -------------------------------------------------------------------------------- Quarter Ended March 31, --------------------------------------- 2002 2001 2002 vs. 2001 -------- ----------- ------------------ (Dollars in Thousands) - ------------------------------------------------- ----------- ------------------ Intersegment shipping sales $(2,226) $(2,134) Intersegment shipping costs (2,226) (2,134) ------- ------- Gross profit -- -- Corporate general, selling and administrative expenses 1,590 2,205 (615) -27.9% Nanocomposite business development expenses 1,169 1,325 (156) (11.8%) ------- ------- ---- Operating loss (2,759) (3,530) 771 (21.8%) - -------------------------------------------------------------------------------- Intersegment shipping sales and costs are related to billings from the transportation segment to the domestic minerals and environmental segments for services. These services are invoiced to the minerals and environmental segments at arms-length rates and those costs are subsequently charged to customers. Intersegment sales and costs reported above reflect the elimination of these transactions. Approximately 50% of the lower corporate administrative expenses in the current year period was associated with increased allocation of these costs to the minerals, environmental and transportation segments. The remaining decrease was attributed to lower personnel and legal costs. Nanocomposite business development expenses are comprised of production, research and development and marketing costs. The 11.8% reduction in expenses from the prior year quarter is associated with a restructuring of the business that was implemented in the second quarter of 2001. Liquidity and Capital Resources - ------------------------------- Working capital was $70.5 million as of March 31, 2002 compared to $70.0 million at December 31, 2001. The current ratio was 3.7-to-1 as of March 31, 2002 compared to 3.3-to-1 at December 31, 2001. For the three months ended March 31, 2002, cash flow from operating activities was $3.2 million compared to $8.3 million for the prior year period. Lower net income, a smaller decrease in current assets and a larger decrease in current liabilities in the current year period were the primary reasons for lower operating cash flow in the current year period. The Company invested $3.4 million in capital expenditures in the current year period compared to $1.4 million in the prior year period. A total of 175 12 thousand shares of the Company's common stock were repurchased at an aggregate value of $1.1 million under the plan authorized by the Company's board of directors in February 2001. Approximately $1.0 million remains in the stock repurchase authorization as of March 31, 2002. Dividends paid in the first quarter were $429 thousand. The Company received approximately $877 thousand from employees, directors and officers upon exercise of stock options granted under incentive and non-qualified plans. Outstanding debt as of March 31, 2002 was $15.5 million which was an increase of $2.2 million from December 31, 2001. Cash totaled $8.5 million compared to $10.3 million at December 31, 2001. Long-term debt represented 9.9% of total capitalization as of March 31, 2002 compared to 8.6% as of December 31, 2001. The Company has a revolving credit facility of $125 million with financial institutions that matures in October 2003. As of March 31, 2002 the Company had approximately $110 million in unused, committed credit lines. The credit facilities combined with funds generated from operations are expected to be adequate to fund capital expenditures and other investments approved by the board of directors at this time. New Accounting Pronouncements - ----------------------------- In July 2001, Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Intangible Assets, was issued. SFAS No. 142 applies to all goodwill and identified intangible assets acquired in a business combination. Under the new standard, all goodwill, including that acquired before initial application of the standard, will no longer be amortized, but should be tested for impairment at least annually. Identified intangible assets will continue to be amortized over their estimated useful lives and reviewed for impairment in accordance with SFAS No. 144. Within six months of initial application of the new standard, a transitional impairment test must be performed on all goodwill. Any impairment loss recognized as a result of the transitional impairment test will be reported as a change in accounting principle. In addition to the transitional impairment test, the required annual impairment test must also performed in the year of adoption of SFAS No. 142. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001, and must be adopted as of the beginning of a fiscal year. The Company adopted SFAS No. 142 effective January 1, 2002. The adoption of SFAS No. 142 had no impact on the financial statements. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143") which addresses financial accounting and reporting for legal obligations associated with the retirement of tangible long-lived assets and the related asset retirement costs. SFAS 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The Company is required to adopt SFAS No. 143 on January 1, 2003 Management is currently evaluating the impact of the adoption of SFAS 143 on the Company's consolidated financial statements. 13 Forward-Looking Statements - -------------------------- Certain statements made from time-to-time by the Company; including statements in the Management's Discussion and Analysis section above, constitute "forward-looking statements" made in reliance upon the safe harbor contained in Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements relating to the Company or its operations that are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions, and statements relating to anticipated growth, levels of capital expenditures, future dividends, and expansion into global markets and the development of new products. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The Company's actual results, performance or achievements could differ materially from the results, performance or achievements expressed in, or implied by, these forward-looking statements as a result of various factors, including, but not limited to, the actual growth in the Company's various markets, utilization of the Company's plants, competition in our business segments, operating costs, weather, currency exchange rates, currency devaluations, delays in development, production and marketing of new products, integration of acquired businesses, and other factors detailed from time-to-time in AMCOL's annual report and other reports filed with the Securities and Exchange Commission. Item 3: Quantitative and Qualitative Disclosure About Market Risk The information required by this item is provided in Footnote 5 "Derivative" under Item 1. There have been no material changes in the company's market risk during the three months ended March 31, 2002. See disclosures as of December 31, 2001 in the Form 10-K, Item 7A. PART II - OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K (a) See Index to Exhibits immediately following the signature page. (b) No reports on Form 8-K were filed during the quarter ended March 31, 2002. 14 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. AMCOL INTERNATIONAL CORPORATION Date: May 7, 2002 /s/ Lawrence E. Washow --------------- -------------------------------------------------- Lawrence E. Washow President and Chief Operating Officer Date: May 7, 2002 /s/ Gary L. Castagna --------------- -------------------------------------------------- Gary L. Castagna Senior Vice President and Chief Financial Officer and Principal Accounting Officer 15 INDEX TO EXHIBITS Exhibit Number - ------ 3.1 Restated Certificate of Incorporation of the Company (5), as amended (10), as amended (16) 3.2 Bylaws of the Company (10) 4 Article Four of the Company's Restated Certificate of Incorporation (5), as amended (16) 10.1 AMCOL International Corporation 1983 Incentive Stock Option Plan (1); as amended (3) 10.3 Lease Agreement for office space dated September 29, 1986, between the Company and American National Bank and Trust Company of Chicago; (1) First Amendment dated June 2, 1994 (8); Second Amendment dated June 2, 1997 (13) 10.4 AMCOL International Corporation 1987 Non-Qualified Stock Option Plan (2); as amended (6) 10.9 AMCOL International Corporation Dividend Reinvestment and Stock Purchase Plan (4); as amended (6) 10.10 AMCOL International Corporation 1993 Stock Plan, as amended and restated (10) 10.11 Credit Agreement by and among AMCOL International Corporation and Harris Trust and Savings Bank, individually and as agent, NBD Bank, LaSalle National Bank and the Northern Trust Company dated October 4, 1994 (7); First Amendment to Credit Agreement dated September 25, 1995 (9), Second Amendment to Credit Agreement dated March 28, 1996 (-), Third Amendment to Credit Agreement dated September 12, 1996 (11), Fourth Amendment to Credit Agreement dated December 15, 1998 (18) and Fifth Amendment to Credit Agreement dated May 26, 2000 (20) 10.15 AMCOL International Corporation 1998 Long-Term Incentive Plan (15), as amended (21) 10.17 Asset and Stock Purchase Agreement dated November 22, 1999 by and between the Registrant and BASF Aktiengesellschaft (19) 10.26 Employment Agreement dated March 15, 2002 by and between Registrant and Gary D. Morrison. 10.27 Employment Agreement dated March 15, 2002 by and between Registrant and Peter M. Maul. 10.28 Employment Agreement dated March 15, 2002 by and between Registrant and Gary Castagna. 10.29 Employment Agreement dated March 15, 2002 by and between Registrant and Ryan F. McKendrick. 10.30 Employment Agreement dated March 15, 2002 by and between Registrant and Lawrence E. Washow. ** Portions of these exhibits have been omitted pursuant to a request for confidential treatment. - -------------------- (1) Exhibit is incorporated by reference to the Registrant's Form 10 filed with the Securities and Exchange Commission on July 27, 1987. (2) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1988. (3) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1993. (4) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1992. (5) Exhibit is incorporated by reference to the Registrant's Form S-3 filed with the Securities and Exchange Commission on September 15, 1993. (6) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1993. (7) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 1994. (8) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1994. (9) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 1995. (10) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1995. (11) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1996. (13) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 1997. (15) Exhibit is incorporated by reference to the Registrant's Form S-8 (File 333-56017) filed with the Securities and Exchange Commission on June 4, 1998. (16) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 1998. (18) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 1999. 16 (19) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1999. (20) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 2000. (21) Exhibit is incorporated by reference to the Registrant's Form S-8 (File 333-68664) filed with the Securities and Exchange Commission on August 30, 2001. 17 EX-10.26 3 dex1026.txt EMPLOYMENT AGMT. DATED 3/15/02 - MORRISON EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (the "Agreement") dated as of March 15, 2002 ("Agreement Date") by and between Amcol International Corporation, a Delaware corporation (the "Company"), and Gary D. Morrison ("Executive"), a resident of Illinois. In consideration of the mutual agreements contained herein, the Company and Executive agree as follows: Article I. DEFINITIONS The terms set forth below have the following meanings (such meanings to be applicable to both the singular and plural forms, except where otherwise expressly indicated): 1.1 "Accrued Annual Bonus" means the amount of any Annual Bonus earned but not yet paid with respect to any Fiscal Year ended prior to the Date of Termination. 1.2 "Accrued Base Salary" means the amount of Executive's Base Salary which is accrued but not yet paid as of the Date of Termination. 1.3 "Affiliate" means any Person that directly or indirectly controls, is controlled by, or is under common control with, the applicable Person. For the purposes of this definition, the term "control" when used with respect to any Person means the power to direct or cause the direction of management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. 1.4 "Agreement" - see the introductory paragraph of this Agreement. 1.5 "Agreement Date" -- see the introductory paragraph of this Agreement. 1.6 "Anniversary Date" means any annual anniversary of the Agreement Date. 1.7 "Annual Bonus" - see Section 4.2. 1.8 "Annualized Bonus" means, as of any date, the greatest of the following amounts that is determinable and applicable: (i) the Target Annual Bonus for the Fiscal Year during which the Date of Termination occurs; and (ii) the average of the Annual Bonuses paid or payable to Executive in respect of the three most recent Fiscal Years ended on or before such date; provided that, in subsection (ii) above, annual bonuses paid in respect of Executive prior to the Agreement Date shall be included in such computation if, as of such date, three years have not elapsed since the Agreement Date; and further provided that if the Executive has not been employed by the Company for three full Fiscal Years ended on or before the Date of Termination, any bonus payable in respect of a partial Fiscal Year shall be annualized and the average of the annual bonuses shall be determined based upon such annualized bonus and the bonuses paid or payable to the Executive in respect of any other full Fiscal Years. 1.9 "Base Salary" -- see Section 4.1. 1.10 "Beneficial Owner" means such term as defined in Rule 13d-3 (or any successor rule) of the SEC under the Exchange Act. 1.11 "Beneficiary" - see Section 9.6. 1.12 "Board" means the Board of Directors of the Company. 1.13 "Cause" means any of the following: (a) Executive's commission of a felony or misdemeanor that involves fraud, dishonesty or moral turpitude, (b) Executive's willful or intentional material breach of this Agreement, or (c) willful or intentional material misconduct by Executive in the performance of his duties under this Agreement. For purposes of clauses (b) and (c) of the preceding sentence, Cause shall not include bad judgment or negligence which results from the Executive's good faith efforts to perform his duties. 1.14 "Change of Control" means any one or more of the following: (a) any person (as such term is used in Rule 13d-5 under the Exchange Act) or group (as such term is defined in Section 3(a)(9) and 13(d)(3) of the Exchange Act), other than a Subsidiary, any employee benefit plan (or any related trust) of the Company or any of its Subsidiaries or any Excluded Person, becomes the Beneficial Owner of 50.1% or more of the common stock of the Company or of Voting Securities representing 50.1% or more of the combined voting power of the Company (such a person or group, a "50.1% Owner"), except that (i) no Change of Control shall be deemed to have occurred solely by reason of such beneficial ownership by a corporation with respect to which both more than 49.9% of the common stock of such corporation and Voting Securities representing more than 49.9% of the aggregate voting power of such corporation are then owned, directly or indirectly, by the persons who were the direct or indirect owners of the common stock and Voting Securities of the Company immediately before such acquisition in substantially the same proportions as their ownership, immediately before such acquisition, of the common stock and Voting Securities of the Company, as the case may be and (ii) such corporation shall not be deemed a 50.1% Owner; or (b) the Incumbent Directors (determined using the Agreement Date as the baseline date) cease for any reason to constitute at least one-half of the directors of the Company then serving; or -2- (c) immediately prior to the consummation by the Company of a merger, reorganization, consolidation, or similar transaction, or a plan or agreement for the sale or other disposition of all, or substantially all of, the consolidated assets of the Company or a plan of liquidation of the Company (any of the foregoing transactions, a "Reorganization Transaction") which is not an Exempt Reorganization Transaction (provided however, there shall be no Change of Control unless the Reorganization Transaction is actually consummated); or (d) the approval by the stockholders of the Company of a plan of liquidation of the Company which, based on information included in the proxy and other written materials distributed to the Company's stockholders in connection with the solicitation by the Company of such stockholder approval, is not expected to qualify as an Exempt Reorganization Transaction; or (e) if the Executive's primary responsibility is being the President of a Subsidiary, the sale by the Company of all of its stock in the Subsidiary or the sale or other disposition of all of the assets of the Subsidiary. Notwithstanding the occurrence of any of the foregoing events, a Change of Control shall not occur with respect to a Executive if, in advance of such event, the Executive agrees in writing that such event shall not constitute a Change of Control. 1.15 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.16 "Company" -- see the introductory paragraph to this Agreement. 1.17 "Date of Termination" means the date of the receipt of the Notice of Termination by Executive (if such Notice is given by the Company) or by the Company (if such Notice is given by Executive), or any later date, not more than 15 days after the giving of such Notice, specified in such notice; provided, however, that: (i) if Executive's employment is terminated by reason of death, the Date of Termination shall be the date of Executive's death; and (ii) if Executive's employment is terminated by reason of Disability, the Date of Termination shall be the 30th day after Executive's receipt of the physician's certification of Disability, unless, before such date, Executive shall have resumed the full-time performance of Executive's duties; and (iii) if Executive terminates his employment without Good Reason or if the Company terminates Executive's employment without Cause, the Date of Termination shall be the 90th day after the giving of such Notice; and (iv) if no Notice of Termination is given, the Date of Termination shall be the last date on which Executive is employed by the Company. 1.18 "Disability" means a mental or physical condition which renders Executive unable or incompetent to carry out the material job responsibilities which such Executive held or -3- the material duties to which Executive was assigned at the time the disability was incurred, which has existed for at least six months and which in the certified opinion of a physician mutually agreed upon by the Company and Executive (which agreement neither party shall unreasonably withhold) is expected to be permanent or to last for an indefinite duration or a duration in excess of six months. 1.19 "Employment Period" - see Section 3.1. 1.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.21 "Excluded Person" means any of the Paul Bechtner Trust, Everett P. Weaver, William D. Weaver or any Named Executive, any Affiliates or Family Member of any of the foregoing and any group (as such term is defined in Section 3(a)(9) and 13(d)(3) of the Exchange Act) of which any of the foregoing is a member. 1.22 "Executive" - see the introductory paragraph of this Agreement. 1.23 "Exempt Reorganization Transaction" means a Reorganization Transaction which results in (i) the Persons who were the direct or indirect owners of the outstanding common stock and Voting Securities of the Company immediately before such Reorganization Transaction becoming, immediately after the consummation of such Reorganization Transaction, the direct or indirect owners of both more than 49.9% of the then-outstanding common stock of the Surviving Corporation and Voting Securities representing more than 49.9% of the aggregate voting power of the Surviving Corporation, in substantially the same respective proportions as such Persons' ownership of the common stock and Voting Securities of the Company immediately before such Reorganization Transaction; or (ii) the Excluded Person owning 50% or more of the common stock of the Surviving Corporation or Voting Securities representing 50% or more of the combined voting power of the Surviving Corporation. 1.24 "Family Member" means, with respect to the applicable Person, a spouse, ancestor, lineal descendant, or spouse of a lineal descendant, including without limitation descendants by adoption. 1.25 "Fiscal Year" means the fiscal year used in connection with the preparation of the consolidated financial statements of the Company. 1.26 "Good Reason" means the occurrence of any one of the following events unless Executive specifically agrees in writing that such event shall not be Good Reason: (a) any material breach of the Agreement by the Company, provided, however, that no breach of this Agreement shall constitute Good Reason unless Executive gives the Company 30 days' prior written notice of such breach and the Company fails to cure such breach within the 30-day period; (b) the failure of either the Company to assign this Agreement to a successor of the Company or failure of a successor of the Company to expressly assume and agree to be bound by the Agreement; or -4- (c) a Termination of Employment by Executive for any reason or no reason during the 30-day period commencing six months after a Change of Control. In the event of the occurrence or omission constituting Good Reason other than an event described in subsection (c) above, Executive may within 90 days after such event occurs notify the Company of the events constituting such Good Reason by a Notice of Termination. In the event of the occurrence constituting Good Reason in subsection (c) above, Executive may within the 30 day period commencing six months after a Change of Control notify the Company of the events constituting such Good Reason by a Notice of Termination. 1.27 "including" means including without limitation. 1.28 "Incumbent Directors" means, as of any specified baseline date, individuals then serving as members of the Board who were members of the Board as of the date immediately preceding such baseline date; provided that any subsequently-appointed or elected member of the Board whose election, or nomination for election by stockholders of the Company or the Surviving Corporation, as applicable, was approved by a vote or written consent of at least one-half of the directors then comprising the Incumbent Directors shall also thereafter be considered an Incumbent Director, unless the initial assumption of office of such subsequently-elected or appointed director was in connection with (i) an actual or threatened election contest, including a consent solicitation, relating to the election or removal of one or more members of the Board, (ii) a "tender offer" (as such term is used in Section 14(d) of the Exchange Act), (iii) a proposed Reorganization Transaction, or (iv) a request, nomination or suggestion of any Beneficial Owner of Voting Securities representing 35% or more of the aggregate voting power of the Voting Securities of the Company or the Surviving Corporation, as applicable. 1.29 "Named Executive" means any individual listed on Exhibit A except to the extent the individual had a termination of employment not less than 120 days prior to the applicable event potentially constituting a Change of Control and any other employee or officer of the Company designated by the Board and who is a party to an agreement substantially in the same form as this Agreement (with variation in the amount of compensation and benefits payable under the agreement) and entered into by the employee or officer not less than 120 days prior to the applicable event potentially constituting a Change of Control. 1.30 "Notice of Termination" means a written notice given in accordance with Section 9.11 which sets forth (a) the specific termination provision in this Agreement relied upon by the party giving such notice, (b) in reasonable detail the specific facts and circumstances claimed to provide a basis for such Termination of Employment, and (c) if the Date of Termination is other than the date of receipt of such Notice of Termination, the Date of Termination. 1.31 "Person" means any individual, sole proprietorship, partnership, joint venture, limited liability company, trust, unincorporated organization, corporation, institution, public benefit corporation, entity or government instrumentality, division, agency, body or department. -5- 1.32 "Prorata Annual Bonus" means the product of (i) the Annual Bonus that Executive would have earned for the Fiscal Year during which the Executive's Date of Termination occurs based upon the Company's achievement of the Target Annual Goals during such Fiscal Year, multiplied by (ii) a fraction of which the numerator is the number of days which have elapsed in such Fiscal Year through the Date of Termination and the denominator of which is 365. 1.33 "Prorata Annualized Bonus" means the product of (i) the Executive's Annualized Bonus, multiplied by (ii) a fraction of which the numerator is the number of days which have elapsed in such Fiscal Year through the Date of Termination and the denominator of which is 365. 1.34 "Reorganization Transaction" -- see the definition of "Change of Control." 1.35 "Subsidiary" means, with respect to any Person, (a) any corporation of which more than 50% of the Voting Securities are at the time, directly or indirectly, owned by such Person, and (b) any partnership or limited liability company in which such Person has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%. 1.36 "Surviving Corporation" means the corporation resulting from a Reorganization Transaction or, if securities representing more than 50% of the aggregate Voting Power of such resulting corporation are directly or indirectly owned by another corporation, such other corporation. 1.37 "Target Annual Bonus" -- see Section 4.2. 1.38 "Target Annual Goals" -- see Section 4.2. 1.39 "Tax Gross-Up Payment" means an amount payable to Executive such that after payment of Taxes on such amount there remains a balance sufficient to pay the Taxes being reimbursed. 1.40 "Taxes" means the incremental federal, state, local and foreign income, employment, excise and other taxes payable by Executive with respect to any applicable item of income. 1.41 "Termination For Good Reason" means a Termination of Employment by Executive for a Good Reason. 1.42 "Termination of Employment" means a termination by the Company or Executive of Executive's employment. 1.43 "Termination Without Cause" means a Termination of Employment by the Company for any reason other than Cause or Executive's death or Disability. 1.44 "Transitional Services Period" - see Section 6.3. -6- 1.45 "Voting Securities" of a corporation means securities of such corporation that are entitled to vote generally in the election of directors of such corporation, but not including any other class of securities of such corporation that may have voting power by reason of the occurrence of a contingency. Article II. DUTIES 2.1 Duties. During the Employment Period, the Company shall employ Executive as President of American Colloid Company, and in connection therewith, the Executive shall perform such duties and responsibilities as may be assigned to him from time to time by, or under the authority of, the Board, the Chief Executive Officer of the Company or any of their designees, and in the absence of such assignment, such duties customary to such office as is necessary to the operations of the Company. Executive shall devote all of his business time, attention and effort during normal business hours, excluding any periods of disability, vacation, or sick leave to which Executive is entitled, to the affairs of the Company and shall use his best efforts to promote the interests of the Company. 2.2 Other Activities. Executive may serve on civic or charitable boards or committees, deliver lectures, fulfill speaking engagements or teach at educational institutions, and manage personal investments; provided that such activities do not significantly interfere with the performance of Executive's duties under this Agreement. Executive may serve on corporate board or committees with the prior written consent of the Board. Article III. EMPLOYMENT PERIOD 3.1 Employment Period. Subject to the termination provisions hereinafter provided, the term of Executive's employment under this Agreement (the "Employment Period") shall begin on the Agreement Date and end on the Anniversary Date which is three years after such date or, if later, such later date to which the Employment Period is extended pursuant to the following sentence. On the date which is two and one-half years after the Agreement Date and thereafter, the Employment Period (assuming that an Expiration Notice to the effect that the Agreement shall expire on the Anniversary Date which is three years after the Agreement Date has not been delivered by the Executive or Company to the other prior to the date which is two and one-half years after the Agreement Date) shall be automatically extended each day by one day to create a new six month term until, at any time after the date which is two and one-half years after the Agreement Date the Company delivers written notice (an "Expiration Notice") to Executive or Executive delivers an Expiration Notice to the Company, in either case, to the effect that the Agreement shall expire on a date specified in the Expiration Notice (the "Expiration Date") that is not less than 6 months after the date the Expiration Notice is delivered to the Company or the Executive, respectively. The Employment Period shall end prior to the end of the Employment Period as described above upon the Executive's Date of Termination even if the Executive continues to provide the services described in Section 6.3(e). The -7- employment of Executive by the Company shall not be terminated other than in accordance with Article VI. Article IV. COMPENSATION 4.1 Salary. During the Employment Period, the Company shall pay or cause to be paid to Executive in accordance with its normal payroll practices (but not less frequently than monthly) an annual salary at a rate of $ 196,000 per year ("Base Salary"). During the Employment Period, the Base Salary shall be reviewed at least annually and may be increased from time to time as shall be determined by the Company. After any such increase, the term "Base Salary" shall thereafter refer to the increased amount. Any increase in Base Salary shall not limit or reduce any other obligation of the Company to Executive under this Agreement. Base Salary shall not be reduced at any time without the express written consent of Executive. 4.2 Annual Bonus. (a) The Company shall pay or cause to be paid to Executive an annual cash bonus ("Annual Bonus") in accordance with the terms hereof for each Fiscal Year which begins or ends during the Employment Period. Executive shall be eligible for an Annual Bonus based upon target performance goals (the "Target Annual Goals"), as determined by the Compensation Committee of the Board on an annual basis, which provides for a payment of at least 60.0% of Executive's Base Salary ("Target Annual Bonus") upon the Executive's achievement of the Target Annual Goals. The Target Annual Goals shall be set as described above no later than February 28 of each Fiscal Year except that in the case of the 2001 Fiscal Year if the Target Annual Goals have not been set prior to the Agreement Date, the Target Annual Goals shall be set within the first 60 days after the Agreement Date. (b) The Company shall pay or cause to be paid the entire Annual Bonus that is payable with respect to a Fiscal Year in cash as soon as practicable after the Company can determine whether and the degree to which Target Annual Goals have been achieved following the close of such Fiscal Year. Any such Annual Bonus shall in any event be paid within 90 days after the end of the Fiscal Year. Article V. OTHER BENEFITS 5.1 Stock Option, Restricted Stock and Other Equity Incentive Plans. In addition to Base Salary and an Annual Bonus, Executive shall be eligible to participate during the Employment Period in all stock option, restricted stock and other equity incentive plans, practices, policies and programs of the Company, in accordance with their terms as in effect from time to time. If a Change of Control occurs during the Employment Period (or, if applicable, the Transitional Services Period), all outstanding stock options, restricted stock and -8- other equity compensation granted to Executive (whether before, on or after the Agreement Date) shall become fully vested and exercisable. 5.2 Incentive, Savings and Retirement Plans. In addition to Base Salary and Annual Bonus, Executive shall be entitled to participate during the Employment Period in all incentives (other than those provided for in Section 5.1), savings and retirement plans, practices, policies and programs that are from time to time applicable to any other comparable senior executive of the Company including any supplemental executive retirement plan, in accordance with their terms as in effect from time to time. 5.3 Welfare Benefits. During the Employment Period, Executive and his family shall be eligible to participate in, and shall receive all benefits under, welfare benefit plans, practices, policies and programs provided by the Company (including medical, prescription, dental, disability, salary continuance, employee life, group life, dependent life, accidental death and travel accident insurance plans and programs) applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time. 5.4 Fringe Benefits. During the Employment Period, Executive shall be entitled to fringe benefits applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time. 5.5 Vacation. During the Employment Period, Executive shall be entitled to paid vacation time in accordance with the plans, practices, policies, and programs applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time, but in no event shall such vacation time be less than four weeks per calendar year. 5.6 Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable employment-related expenses incurred by Executive upon the receipt by the Company of an accounting in accordance with practices, policies, and procedures applicable to any comparable senior executive of the Company, in accordance with their terms as in effect from time to time. Article VI. TERMINATION BENEFITS 6.1 Termination for Cause or Other than for Good Reason, etc. If the Company terminates Executive's employment for Cause or Executive terminates his employment other than for Good Reason, death or Disability, the Company shall pay to Executive immediately after the Date of Termination an amount equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus and Executive shall not be entitled to receive any severance payment. 6.2 Termination for Death or Disability Prior to Change of Control or More than Seven Months after a Change of Control. If Executive's employment terminates due to his death or Disability prior to a Change of Control or more than seven months after a Change of Control, the Company shall pay to Executive or his Beneficiaries, as the case may be, (i) immediately -9- after the Date of Termination an amount which is equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus, and (ii) at the time described in Section 4.2(b), an amount which is equal to the Executive's Prorata Annual Bonus. 6.3 Termination Without Cause or for Good Reason Prior to Change of Control. In the event of a Termination Without Cause or a Termination for Good Reason prior to a Change of Control, Executive shall receive the following: (a) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus; (b) at the time described in Section 4.2(b), an amount which is equal to the Executive's Prorata Annual Bonus; (c) Base Salary payable on the same basis as in effect immediately prior to the Date of Termination for eighteen months following the Executive's Date of Termination; (d) immediately after the Date of Termination, a lump-sum amount in immediately available funds of any amount then payable to Executive pursuant to Article VIII; (e) during the period (the "Transitional Services Period") beginning on the Executive's Date of Termination and ending on the earliest of (i) eighteen months after the Executive's Date of Termination (ii) the date on which the Executive accepts a position with another employer, (iii) the date on which Executive breaches any of the provisions of Sections 7.1 and 7.2, and (iv) the date on which the Executive terminates his employment with the Company, the Executive shall remain an employee of the Company and shall only perform such transitional assignments for the Company as may be assigned to him from time to time by the Chief Executive Officer; (f) the benefits specified in Sections 5.2 (other than those provided by tax-qualified plans), 5.3 and 5.4 to which Executive is entitled as of the Date of Termination during the Transitional Services Period; provided that any coverage required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, ("COBRA") shall begin after the end of the Transitional Services Period; and (g) for purposes of the Company's stock option plans, restricted stock plans and other equity compensation plans, the Executive shall be considered an employee of the Company for all purposes under such plans through the end of the Transitional Services Period except Executive shall not be eligible for new grants under such plans. Notwithstanding any provisions of this Section 6.3 to the contrary, if Executive breaches any or all of the provisions of Sections 7.1 and 7.2, the payment of the Prorata Annual Bonus pursuant to Section 6.3(b) and the continuation of Base Salary and benefits pursuant to Sections 6.3(c), 6.3(f) (other than COBRA), and 6.3(g) shall cease upon such breach. In addition to the foregoing, and to protect and compensate the Company in the event of such breach by the -10- Executive, the Company shall be entitled to any and all remedies at law and equitable relief as described in Section 7.3. 6.4 Termination Without Cause or for Good Reason On or After Change of Control. In the event that the Executive has a Termination Without Cause or a Termination for Good Reason on or after a Change of Control, the Executive shall receive the following: (a) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to the sum of Executive's Accrued Base Salary, Accrued Annual Bonus and Prorata Annualized Bonus; (b) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to two times the sum of (i) the Executive's Base Salary and (ii) the Executive's Annualized Bonus; (c) the benefits specified in Sections 5.2 (other than those provided by tax-qualified plans), 5.3 and 5.4 to which Executive is entitled as of the Date of Termination for two years following his Date of Termination on the same basis as if Executive was employed by the Company during such two year period; provided, that if any of the foregoing benefits described in 5.3 cannot be provided by the Company under the applicable benefit plan, the Executive shall receive in lieu of such benefits a cash lump sum payment immediately after the Date of Termination equal to two times the Company's annual contributions and premiums on behalf of the Executive to such plan (determined based upon the year in which the Date of Termination occurs) together with a Tax Gross-Up Payment for any Taxes payable by Executive on such payments; and further provided that any coverage required by COBRA shall begin two years after the Date of Termination (or, if earlier, as of the date on which the Executive's benefit giving rise to COBRA ceases); and (d) immediately after the Date of Termination, a lump-sum amount in immediately available funds of any amount then payable to Executive pursuant to Article VIII. Notwithstanding any provisions of this Section 6.4 to the contrary, if Executive breaches any or all of the provisions of Sections 7.1 and 7.2, the continuation of benefits pursuant to Section 6.4(c) shall cease upon such breach and, to prevent the Executive's unjust enrichment, the Executive shall immediately pay the Company an amount equal to (i) the amount that the Executive received from the Company pursuant to this Section 6.4, multiplied by (ii) a fraction of which the numerator is the number of days remaining from the date of the breach through the first anniversary of the Executive's Termination of Employment and the denominator of which is 365. In addition to the foregoing, and to protect and compensate the Company in the event of such breach by the Executive, the Company shall be entitled to any and all remedies at law and equitable relief as described in Section 7.3. 6.5 Termination for Death or Disability within Seven Months of a Change of Control. In the event that the Executive has a Termination of Employment due to death or Disability within seven months after a Change of Control, the Executive's Beneficiaries shall receive the -11- compensation and benefits described in Section 6.4 except that the continued benefits (or cash in lieu thereof) described in Section 6.4(c) shall be limited to the welfare benefits specified in Section 5.3. 6.6 Imminent Control Change. If an Imminent Control Change Date (as defined below) occurs on or within 30 days after the date on which the Company delivers a Notice of Termination to Executive terminating Executive's employment not for Cause and if a Change of Control occurs within 180 days after delivery of the Notice, the Executive's Termination of Employment pursuant to the Notice, shall be deemed a Termination of Employment Without Cause on or after a Change of Control and the Executive's rights and obligations shall be determined under Section 6.4 rather than Section 6.3. Any payments or benefits to be received by the Executive pursuant to Section 6.4 shall be reduced by any payments or benefits made or provided pursuant to Section 6.3. If an Imminent Control Change Date occurs on or within 30 days after the date on which the Executive has a Termination of Employment due to death or Disability and if a Change of Control occurs within 180 days after death or Disability, the Executive's Termination of Employment due to death or Disability shall be deemed a Termination of Employment due to death or Disability on or after a Change of Control and the Executive's Beneficiaries' rights and obligations shall be determined under Section 6.5 rather than Section 6.2. Any payments or benefits to be received by the Executive's Beneficiaries pursuant to Section 6.5 shall be reduced by any payments or benefits made or provided pursuant to Section 6.2. "Imminent Control Change Date" means any date on which occurs (a) a presentation to the Company's stockholders generally or any of the Company's directors or executive officers of a proposal or offer for a Change of Control, (b) the public announcement (whether by advertisement, press release, press interview, public statement, SEC filing or otherwise) of a proposal or offer for a Change of Control, or (c) such proposal or offer remains effective and unrevoked. 6.7 Other Rights. This Agreement shall not prevent or limit Executive's continuing or future participation in any benefit, bonus, incentive or other plan, program or policy provided by the Company and for which Executive may qualify, nor shall this Agreement limit or otherwise affect such rights as Executive may have under any other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, program or policy and any other payment or benefit required by law at or after the Date of Termination shall be payable in accordance with such plan, program or policy or applicable law except as expressly modified by this Agreement. 6.8 Termination Rights. Executive recognizes and agrees that the Company has the right to terminate his employment for any reason or no reason and that upon such termination the Executive's sole right is to receive compensation and benefits in accordance with the terms of this Agreement. Article VII. COVENANTS 7.1 Non-Disclosure and Non-Solicitation. Executive acknowledges that the successful marketing and development of the Company's products requires substantial time and -12- expense. Such efforts utilize and generate valuable confidential and proprietary information, of which Executive will obtain knowledge during the course of his employment with the Company. As used herein, "Confidential Information" means any information of the Company that the Company considers to be proprietary and treats as confidential or information of any third party that the Company is under an obligation to keep confidential, including but not limited to the following: (i) trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, (ii) employment status, salaries and other personnel information, decisions to offer employment, pre-employment testing and screening results, citizenship status, disability status, performance issues, executive evaluations, medical problems of executives and executives' families, garnishments and levies against wages, contents of employment agreements, statements regarding the financial condition of the Company or any subsidiary or affiliated entity, payments made to or expenses incurred by the Company or any of its executives, shareholders or directors, discounts given by the Company, vendors and other parties, minutes of Board meetings of the Company or any subsidiary or affiliated entities, contents of contracts, legal matters by or against the Company or any subsidiary or affiliated entities, business strategies, plans, proposals, names of customers and potential customers; and (iii) other information or materials of the Company marked or noticed by the Company as being confidential, whether constituting a trade secret or not, and whether proprietary or not, which are of value to the Company. For purposes of this Agreement, Confidential Information includes the foregoing and other information protected under the Illinois Trade Secrets Act. Confidential Information does not include: (i) information that at the time of disclosure is in the public domain through no fault of Executive; (ii) information received from a third party outside of the Company that was disclosed without a breach of any confidentiality obligation; (iii) information approved for public release by written authorization of the Company; or (iv) information that is required by law or an order of any court, agency or proceeding to be disclosed. Executive acknowledges and agrees that the Company shall retain exclusive ownership of all right, title, and interest in the Confidential Information, including any and all worldwide copyrights, trade secrets, patent, and confidential and proprietary information rights. Executive agrees to undertake the following obligations, which Executive acknowledges to be reasonably designed to protect the Company's legitimate business interests without unnecessarily or unreasonably restricting Executive's post-employment opportunities: (a) Executive agrees that he will not at any time, whether during or after the cessation of his employment, reveal or permit any other person or entity to reveal, any of the Confidential Information to any person or any entity, except, and only to the extent, as may be required in the ordinary course of performing Executive's assigned duties as an Executive of the Company, and Executive agrees to keep secret, and take all necessary precautions against disclosure of, all Confidential Information and all matters entrusted to him and not to use or attempt to use any Confidential Information in any manner that may cause injury or loss, or may be calculated to cause injury or loss, whether directly or indirectly, to the Company or its customers; (b) Executive agrees that during and after his employment he shall not remove, copy, duplicate or otherwise reproduce, use or permit to be used any notes, memoranda, reports, lists, records, drawings, sketches, specifications, software programs, data, documentation or other materials of any nature relating to any matter within the -13- scope of the business of the Company or concerning any of its dealings or affairs except as required to perform Executive's duties for the Company; (c) Upon cessation of his employment relationship with the Company, Executive shall immediately deliver to the Company all Confidential Information and other materials relating to the Company in his possession or delivered to him by the Company, including computer programs, files, notes, records, memoranda, reports, lists, drawings, sketches, specifications, data, charts, and other documents, materials and things ("Materials"), whether or not containing Confidential Information, whether or not prepared by Executive, it being agreed that all Materials shall be and remain the sole and exclusive property of the Company; (d) Without limiting the obligations of Section 7.1(c), Executive agrees that while Executive is employed by the Company prior to his Date of Termination and for a period of one year following his Date of Termination he will not, whether alone or as employee, owner, partner, officer, director, consultant, agent, executive, independent contractor, or stockholder of any firm, corporation or other commercial enterprise, directly or indirectly solicit business from: (i) any customer of the Company with which Executive had contact, participated in the contact, or about which Executive had knowledge of Confidential Information by reason of Executive's employment with the Company within the one year period preceding the Date of Termination, or (ii) any current customer prospect of the Company for whom Executive directly or indirectly assisted in the preparation or submission of a proposal made by the Company to such customer prospect during the one year period preceding the Date of Termination, unless the Company acknowledges in writing its intent not to further pursue such customer prospect; provided, further, that Executive shall, however, be permitted to own securities of any public company not in excess of 5% of any class of such securities and to own stock, partnership interests or other securities of any non-public entity not in excess of 5% of any class of such securities, and such ownership shall not be considered to be in competition with the Company; and (e) Except as may be required in the ordinary course of performing his duties as an employee of the Company, while employed prior to his Date of Termination and during the one year period immediately following the Date of Termination, Executive shall not, directly or indirectly, solicit or attempt to solicit any employee of the Company to work for any person, partnership or entity other than the Company, or engage in any activity that would cause any such employee to violate any agreement with the Company, or dissuade, or attempt to dissuade, any such employee from faithfully discharging such employee's contractual and fiduciary obligations to serve the Company's interests with undivided loyalty. 7.2 Non Competition. Without limiting the obligation imposed by Section 7.1, and to more fully protect the Confidential Information, Executive hereby agrees that while he is employed by the Company prior to the Date of Termination and for a period of one year following the Date of Termination, he will not, directly or indirectly, anywhere in the world where the Company conducts business, render services to any Conflicting Organization in any capacity in which the Confidential Information of the Company would reasonably be considered -14- to be useful to the Conflicting Organization; provided, however, that Executive may render services to a Conflicting Organization whose business is diversified (and which has separate and distinct divisions), as long as such services are being rendered to a part of the business that is separate and distinct from the part of the business that renders such person or entity a Conflicting Organization. (a) If, at the time of enforcement of Sections 7.1 and 7.2, a court shall hold that the duration, scope, area or activity restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope, area or activity restrictions reasonable and enforceable under such circumstances shall be substituted for the stated duration, scope, area or activity restrictions. (b) "Conflicting Organization" means for the purposes of this Section, any person or entity which is engaged in or about to become engaged in, research, development, production, manufacturing, importation, marketing, licensing, selling, or servicing of a Conflicting Product. (c) "Conflicting Product" means any product, process, system or service of any person or organization other than the Company or an Affiliate, in existence or under development, which is the same as or similar to or competes with a product, process, system or service upon which Executive works or has worked during the three year period ending on his Date of Termination, or about which Executive acquired or acquires Confidential Information. 7.3 Remedies. Executive recognizes and agrees that a breach of any or all of the provisions of Sections 7.1 and 7.2 will constitute immediate and irreparable harm to the Company for which damages cannot be readily calculated and for which damages are an inadequate remedy. Accordingly, Executive acknowledges that in addition to any and all remedies at law, the Company shall be entitled to specific performance or injunctive or other equitable relief to prevent the breach or threatened breach of Executive's obligations under this Agreement. 7.4 Intellectual Property. During the employment period, Executive shall disclose immediately to the Company all ideas, inventions and business plans that he makes, conceives, discovers or develops during the course of his employment with the Company, including any inventions, modifications, discoveries, developments, improvements, computer programs, processes, products or procedures (whether or not protectable upon application by copyright, patent, trademark, trade secret or other proprietary rights) ("Work Product") that: (i) relate to the business of the Company or any customer or supplier to the Company or any of the products or services being developed, manufactured, sold or otherwise provided by the Company or that may be used in relation therewith; or (ii) result from tasks assigned to Executive by the Company; or (iii) result from the use of the premises or personal property (whether tangible or intangible) owned, leased or contracted for by the Company. Executive agrees that any Work Product shall be the property of the Company and, if subject to copyright, shall be considered a "work made for hire" within the meaning of the Copyright Act of 1976, as amended (the "Act"). If and to the extent that any such Work Product is found as a matter of law not to be a "work made for hire" within the meaning of the Act, Executive expressly assigns to the Company all right, title and -15- interest in and to the Work Product, and all copies thereof, and the copyright, patent, trademark, trade secret and all their proprietary rights in the Work Product, without further consideration, free from any claim, lien for balance due or rights of retention thereto on the part of Executive. (a) To the extent applicable, pursuant to Illinois Executive Patent Act, the Company hereby notifies Executive that the preceding paragraph does not apply to any inventions for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on the Executive's own time, unless: (i) the invention relates (a) to the Company's business, or (b) to the Company's actual or demonstrably anticipated research or development, or (ii) the invention results from any work performed by the Executive for the Company. (b) Executive agrees that upon disclosure of Work Product to the Company, Executive will, during his employment and at any time thereafter, at the request and cost of the Company all such documents and perform all such acts as the Company or its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world, and when so obtained or vested to renew and restore the same; and (ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection. (c) In the event that the Company is unable, after reasonable effort, to secure Executive's signature on any letters patent, copyright or other analogous protection relating to Work Product, whether because of Executive's physical or mental incapacity or for any other reason whatsoever, Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney-in-fact, to act for and on his behalf to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright and other analogous protection with the same legal force and effect as if personally executed by Executive. Article VIII. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY 8.1 Tax Gross-Up Payment. If at any time or from time to time it shall be determined that any payment to Executive pursuant to this Agreement or any other payment or benefit from the Company, any Affiliate, any shareholder of the Company or any other person would be subject to the excise tax imposed by Section 4999 of the Code or any similar tax payable under any United States federal, state, local, foreign or other law, then Executive shall receive and the Company shall pay or cause to be paid a Tax Gross-Up Payment with respect to all such excise taxes and other Taxes. The Tax Gross-Up Payment is intended to compensate Executive for all such excise taxes and any federal, state, local, foreign or other income, employment, or excise taxes or other taxes payable by Executive with respect to the Tax Gross-Up Payment. -16- Article IX. MISCELLANEOUS 9.1 Approvals. The Company represents and warrants to Executive it has taken all corporate action necessary to authorize this Agreement. 9.2 Full Settlement. The exclusive method for the Company to terminate its obligations to provide compensation or benefits to Executive pursuant to Articles IV and V of this Agreement is to terminate Executive's employment in compliance with all applicable requirements of Sections 6.1, 6.2, 6.3, 6.4 or 6.5 of this Agreement, as applicable, and to make the payments and provide the benefits specified in such applicable Section. 9.3 No Mitigation. In no event shall Executive be obligated to seek other employment or take any other action to mitigate the amounts payable to Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned as a result of Executive's employment by another employer, except that any continued welfare benefits provided for by Section 6.3(f) or Section 6.4(c) shall not duplicate any benefits that are provided to Executive and his family by such other employer and shall be secondary to any coverage provided by such other employer. 9.4 Enforcement. (a) If Executive incurs legal, accounting, expert witness or other fees, costs or expenses in an effort to establish entitlement to, or obtain compensation or benefits or Tax Gross-Up Payment under this Agreement, the Company shall reimburse Executive for such fees and expenses if the Executive prevails (after exhaustion of all available judicial remedies) and provide the Executive with a Tax Gross-Up Payment for any Taxes payable by Executive on such reimbursements. (b) If the Company fails to pay any amount provided under this Agreement when due, the Company shall pay interest on such amount at an annual rate equal to the lesser of (i) (A) the highest rate of interest charged by the Company's principal lender on its revolving credit agreements plus 200 basis points, or (B) in the absence of such a lender, 200 basis points over the prime commercial lending rate announced by The Wall Street Journal in effect from time to time during the period of such nonpayment, or (ii) the highest legally-permissible interest rate allowed to be charged under applicable law. 9.5 Release. Notwithstanding any provisions of this Agreement to the contrary, the Company's obligations to make payments and to provide benefits under Sections 6.3, 6.4 and 6.5, other than the obligation to pay Accrued Base Salary and Accrued Annual Bonus, are expressly conditioned upon the Executive's execution of a mutual release and waiver substantially in the form attached hereto as Exhibit A and the expiration of the Revocation Period as defined in the release. 9.6 Beneficiary. If Executive dies prior to receiving all of the amounts payable to him in accordance with the terms and conditions of this Agreement, such amounts shall be paid -17- to the beneficiary ("Beneficiary") designated by Executive in writing to the Company during his lifetime, or if no such Beneficiary is designated, to Executive's estate. Such payments shall be made in a lump sum to the extent so payable and, to the extent not payable in a lump sum, in accordance with the terms of this Agreement. Such payments shall not be less than the amount payable to Executive as if Executive had lived to the date of payment and were the payee. Executive, without the consent of any prior Beneficiary, may change his designation of Beneficiary or Beneficiaries at any time or from time to time by submitting to the Company a new designation in writing. 9.7 Assignment; Successors. The Company may not assign its respective rights and obligations under this Agreement without the prior written consent of Executive except to a successor of the Company's business. This Agreement shall be binding upon and inure to the benefit of Executive, his estate and Beneficiaries, the Company and the successors and permitted assigns of the Company. 9.8 Non-alienation. Except as is otherwise expressly provided herein, benefits payable under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by Executive, and any such attempt to dispose of any right to benefits payable hereunder shall be void. 9.9 Severability. If all or any part of this Agreement is declared to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of this Agreement not declared to be unlawful or invalid. Any provision so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such provision to the fullest extent possible while remaining lawful and valid. 9.10 Amendment; Waiver. This Agreement shall not be amended or modified except by written instrument executed by the Company and Executive. A waiver of any term, covenant or condition contained in this Agreement shall not be deemed a waiver of any other term, covenant or condition, and any waiver of any default in any such term, covenant or condition shall not be deemed a waiver of any later default thereof or of any other term, covenant or condition. 9.11 Notices. All notices hereunder shall be in writing and delivered by hand, by nationally-recognized delivery service that guarantees overnight delivery, or by first-class, registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Company, to: Chief Executive Officer Amcol International Corporation One North Arlington 1500 West Shore Drive Arlington Heights, IL 60004-7803 If to Executive, to: (at his most recent home address or facsimile number on file with the Company) -18- Either party may from time to time designate a new address by notice given in accordance with this Section. Notice shall be effective when actually received by the addressee. 9.12 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument. 9.13 Captions. The captions of this Agreement are not a part of the provisions hereof and shall have no force or effect. 9.14 Entire Agreement. This Agreement forms the entire agreement between the parties hereto with respect to the subject matter contained in the Agreement and shall supersede all prior agreements, promises and representations regarding employment, compensation, severance or other payments contingent upon termination of employment, whether in writing or otherwise, including but not limited to that certain change of control agreement dated September 22, 2000 by and between the Company and the Executive. 9.15 Applicable Law. This Agreement shall be interpreted and construed in accordance with the laws of the State of Illinois, without regard to its choice of law principles. 9.16 Survival of Executive's Rights. All of Executive's rights hereunder, including his rights to compensation and benefits, and his obligations under Article VI and Article VII hereof, shall survive the termination of Executive's employment or the termination of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. AMCOL INTERNATIONAL CORPORATION By: ------------------------------------ Its: Chief Executive Office ----------------------------------- EXECUTIVE --------------------------------------- Gary D. Morrison -19- EX-10.27 4 dex1027.txt EMPLOYMENT AGMT. DATED 3/15/02 - MAUL EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (the "Agreement") dated as of March 15, 2002 ("Agreement Date") by and between Amcol International Corporation, a Delaware corporation (the "Company"), and Peter L. Maul ("Executive"), a resident of Illinois. In consideration of the mutual agreements contained herein, the Company and Executive agree as follows: Article I. DEFINITIONS The terms set forth below have the following meanings (such meanings to be applicable to both the singular and plural forms, except where otherwise expressly indicated): 1.1 "Accrued Annual Bonus" means the amount of any Annual Bonus earned but not yet paid with respect to any Fiscal Year ended prior to the Date of Termination. 1.2 "Accrued Base Salary" means the amount of Executive's Base Salary which is accrued but not yet paid as of the Date of Termination. 1.3 "Affiliate" means any Person that directly or indirectly controls, is controlled by, or is under common control with, the applicable Person. For the purposes of this definition, the term "control" when used with respect to any Person means the power to direct or cause the direction of management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. 1.4 "Agreement" -- see the introductory paragraph of this Agreement. 1.5 "Agreement Date" -- see the introductory paragraph of this Agreement. 1.6 "Anniversary Date" means any annual anniversary of the Agreement Date. 1.7 "Annual Bonus" -- see Section 4.2. 1.8 "Annualized Bonus" means, as of any date, the greatest of the following amounts that is determinable and applicable: (i) the Target Annual Bonus for the Fiscal Year during which the Date of Termination occurs; and (ii) the average of the Annual Bonuses paid or payable to Executive in respect of the three most recent Fiscal Years ended on or before such date; provided that, in subsection (ii) above, annual bonuses paid in respect of Executive prior to the Agreement Date shall be included in such computation if, as of such date, three years have not elapsed since the Agreement Date; and further provided that if the Executive has not been employed by the Company for three full Fiscal Years ended on or before the Date of Termination, any bonus payable in respect of a partial Fiscal Year shall be annualized and the average of the annual bonuses shall be determined based upon such annualized bonus and the bonuses paid or payable to the Executive in respect of any other full Fiscal Years. 1.9 "Base Salary" -- see Section 4.1. 1.10 "Beneficial Owner" means such term as defined in Rule 13d-3 (or any successor rule) of the SEC under the Exchange Act. 1.11 "Beneficiary" -- see Section 9.6. 1.12 "Board" means the Board of Directors of the Company. 1.13 "Cause" means any of the following: (a) Executive's commission of a felony or misdemeanor that involves fraud, dishonesty or moral turpitude, (b) Executive's willful or intentional material breach of this Agreement, or (c) willful or intentional material misconduct by Executive in the performance of his duties under this Agreement. For purposes of clauses (b) and (c) of the preceding sentence, Cause shall not include bad judgment or negligence which results from the Executive's good faith efforts to perform his duties. 1.14 "Change of Control" means any one or more of the following: (a) any person (as such term is used in Rule 13d-5 under the Exchange Act) or group (as such term is defined in Section 3(a)(9) and 13(d)(3) of the Exchange Act), other than a Subsidiary, any employee benefit plan (or any related trust) of the Company or any of its Subsidiaries or any Excluded Person, becomes the Beneficial Owner of 50.1% or more of the common stock of the Company or of Voting Securities representing 50.1% or more of the combined voting power of the Company (such a person or group, a "50.1% Owner"), except that (i) no Change of Control shall be deemed to have occurred solely by reason of such beneficial ownership by a corporation with respect to which both more than 49.9% of the common stock of such corporation and Voting Securities representing more than 49.9% of the aggregate voting power of such corporation are then owned, directly or indirectly, by the persons who were the direct or indirect owners of the common stock and Voting Securities of the Company immediately before such acquisition in substantially the same proportions as their ownership, immediately before such acquisition, of the common stock and Voting Securities of the Company, as the case may be and (ii) such corporation shall not be deemed a 50.1% Owner; or (b) the Incumbent Directors (determined using the Agreement Date as the baseline date) cease for any reason to constitute at least one-half of the directors of the Company then serving; or -2- (c) immediately prior to the consummation by the Company of a merger, reorganization, consolidation, or similar transaction, or a plan or agreement for the sale or other disposition of all, or substantially all of, the consolidated assets of the Company or a plan of liquidation of the Company (any of the foregoing transactions, a "Reorganization Transaction") which is not an Exempt Reorganization Transaction (provided however, there shall be no Change of Control unless the Reorganization Transaction is actually consummated); or (d) the approval by the stockholders of the Company of a plan of liquidation of the Company which, based on information included in the proxy and other written materials distributed to the Company's stockholders in connection with the solicitation by the Company of such stockholder approval, is not expected to qualify as an Exempt Reorganization Transaction; or (e) if the Executive's primary responsibility is being the President of a Subsidiary, the sale by the Company of all of its stock in the Subsidiary or the sale or other disposition of all of the assets of the Subsidiary. Notwithstanding the occurrence of any of the foregoing events, a Change of Control shall not occur with respect to a Executive if, in advance of such event, the Executive agrees in writing that such event shall not constitute a Change of Control. 1.15 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.16 "Company" -- see the introductory paragraph to this Agreement. 1.17 "Date of Termination" means the date of the receipt of the Notice of Termination by Executive (if such Notice is given by the Company) or by the Company (if such Notice is given by Executive), or any later date, not more than 15 days after the giving of such Notice, specified in such notice; provided, however, that: (i) if Executive's employment is terminated by reason of death, the Date of Termination shall be the date of Executive's death; and (ii) if Executive's employment is terminated by reason of Disability, the Date of Termination shall be the 30th day after Executive's receipt of the physician's certification of Disability, unless, before such date, Executive shall have resumed the full-time performance of Executive's duties; and (iii) if Executive terminates his employment without Good Reason or if the Company terminates Executive's employment without Cause, the Date of Termination shall be the 90th day after the giving of such Notice; and (iv) if no Notice of Termination is given, the Date of Termination shall be the last date on which Executive is employed by the Company. 1.18 "Disability" means a mental or physical condition which renders Executive unable or incompetent to carry out the material job responsibilities which such Executive held or -3- the material duties to which Executive was assigned at the time the disability was incurred, which has existed for at least six months and which in the certified opinion of a physician mutually agreed upon by the Company and Executive (which agreement neither party shall unreasonably withhold) is expected to be permanent or to last for an indefinite duration or a duration in excess of six months. 1.19 "Employment Period" - see Section 3.1. 1.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.21 "Excluded Person" means any of the Paul Bechtner Trust, Everett P. Weaver, William D. Weaver or any Named Executive, any Affiliates or Family Member of any of the foregoing and any group (as such term is defined in Section 3(a)(9) and 13(d)(3) of the Exchange Act) of which any of the foregoing is a member. 1.22 "Executive" -- see the introductory paragraph of this Agreement. 1.23 "Exempt Reorganization Transaction" means a Reorganization Transaction which results in (i) the Persons who were the direct or indirect owners of the outstanding common stock and Voting Securities of the Company immediately before such Reorganization Transaction becoming, immediately after the consummation of such Reorganization Transaction, the direct or indirect owners of both more than 49.9% of the then-outstanding common stock of the Surviving Corporation and Voting Securities representing more than 49.9% of the aggregate voting power of the Surviving Corporation, in substantially the same respective proportions as such Persons' ownership of the common stock and Voting Securities of the Company immediately before such Reorganization Transaction; or (ii) the Excluded Person owning 50% or more of the common stock of the Surviving Corporation or Voting Securities representing 50% or more of the combined voting power of the Surviving Corporation. 1.24 "Family Member" means, with respect to the applicable Person, a spouse, ancestor, lineal descendant, or spouse of a lineal descendant, including without limitation descendants by adoption. 1.25 "Fiscal Year" means the fiscal year used in connection with the preparation of the consolidated financial statements of the Company. 1.26 "Good Reason" means the occurrence of any one of the following events unless Executive specifically agrees in writing that such event shall not be Good Reason: (a) any material breach of the Agreement by the Company, provided, however, that no breach of this Agreement shall constitute Good Reason unless Executive gives the Company 30 days' prior written notice of such breach and the Company fails to cure such breach within the 30-day period; (b) the failure of either the Company to assign this Agreement to a successor of the Company or failure of a successor of the Company to expressly assume and agree to be bound by the Agreement; or -4- (c) a Termination of Employment by Executive for any reason or no reason during the 30-day period commencing six months after a Change of Control. In the event of the occurrence or omission constituting Good Reason other than an event described in subsection (c) above, Executive may within 90 days after such event occurs notify the Company of the events constituting such Good Reason by a Notice of Termination. In the event of the occurrence constituting Good Reason in subsection (c) above, Executive may within the 30 day period commencing six months after a Change of Control notify the Company of the events constituting such Good Reason by a Notice of Termination. 1.27 "including" means including without limitation. 1.28 "Incumbent Directors" means, as of any specified baseline date, individuals then serving as members of the Board who were members of the Board as of the date immediately preceding such baseline date; provided that any subsequently-appointed or elected member of the Board whose election, or nomination for election by stockholders of the Company or the Surviving Corporation, as applicable, was approved by a vote or written consent of at least one-half of the directors then comprising the Incumbent Directors shall also thereafter be considered an Incumbent Director, unless the initial assumption of office of such subsequently-elected or appointed director was in connection with (i) an actual or threatened election contest, including a consent solicitation, relating to the election or removal of one or more members of the Board, (ii) a "tender offer" (as such term is used in Section 14(d) of the Exchange Act), (iii) a proposed Reorganization Transaction, or (iv) a request, nomination or suggestion of any Beneficial Owner of Voting Securities representing 35% or more of the aggregate voting power of the Voting Securities of the Company or the Surviving Corporation, as applicable. 1.29 "Named Executive" means any individual listed on Exhibit A except to the extent the individual had a termination of employment not less than 120 days prior to the applicable event potentially constituting a Change of Control and any other employee or officer of the Company designated by the Board and who is a party to an agreement substantially in the same form as this Agreement (with variation in the amount of compensation and benefits payable under the agreement) and entered into by the employee or officer not less than 120 days prior to the applicable event potentially constituting a Change of Control. 1.30 "Notice of Termination" means a written notice given in accordance with Section 9.11 which sets forth (a) the specific termination provision in this Agreement relied upon by the party giving such notice, (b) in reasonable detail the specific facts and circumstances claimed to provide a basis for such Termination of Employment, and (c) if the Date of Termination is other than the date of receipt of such Notice of Termination, the Date of Termination. 1.31 "Person" means any individual, sole proprietorship, partnership, joint venture, limited liability company, trust, unincorporated organization, corporation, institution, public benefit corporation, entity or government instrumentality, division, agency, body or department. -5- 1.32 "Prorata Annual Bonus" means the product of (i) the Annual Bonus that Executive would have earned for the Fiscal Year during which the Executive's Date of Termination occurs based upon the Company's achievement of the Target Annual Goals during such Fiscal Year, multiplied by (ii) a fraction of which the numerator is the number of days which have elapsed in such Fiscal Year through the Date of Termination and the denominator of which is 365. 1.33 "Prorata Annualized Bonus" means the product of (i) the Executive's Annualized Bonus, multiplied by (ii) a fraction of which the numerator is the number of days which have elapsed in such Fiscal Year through the Date of Termination and the denominator of which is 365. 1.34 "Reorganization Transaction" -- see the definition of "Change of Control." 1.35 "Subsidiary" means, with respect to any Person, (a) any corporation of which more than 50% of the Voting Securities are at the time, directly or indirectly, owned by such Person, and (b) any partnership or limited liability company in which such Person has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%. 1.36 "Surviving Corporation" means the corporation resulting from a Reorganization Transaction or, if securities representing more than 50% of the aggregate Voting Power of such resulting corporation are directly or indirectly owned by another corporation, such other corporation. 1.37 "Target Annual Bonus" -- see Section 4.2. 1.38 "Target Annual Goals" -- see Section 4.2. 1.39 "Tax Gross-Up Payment" means an amount payable to Executive such that after payment of Taxes on such amount there remains a balance sufficient to pay the Taxes being reimbursed. 1.40 "Taxes" means the incremental federal, state, local and foreign income, employment, excise and other taxes payable by Executive with respect to any applicable item of income. 1.41 "Termination For Good Reason" means a Termination of Employment by Executive for a Good Reason. 1.42 "Termination of Employment" means a termination by the Company or Executive of Executive's employment. 1.43 "Termination Without Cause" means a Termination of Employment by the Company for any reason other than Cause or Executive's death or Disability. 1.44 "Transitional Services Period" - see Section 6.3. -6- 1.45 "Voting Securities" of a corporation means securities of such corporation that are entitled to vote generally in the election of directors of such corporation, but not including any other class of securities of such corporation that may have voting power by reason of the occurrence of a contingency. Article II. DUTIES 2.1 Duties. During the Employment Period, the Company shall employ Executive as President of Nanocor Incorporated, and in connection therewith, the Executive shall perform such duties and responsibilities as may be assigned to him from time to time by, or under the authority of, the Board, the Chief Executive Officer of the Company or any of their designees, and in the absence of such assignment, such duties customary to such office as is necessary to the operations of the Company. Executive shall devote all of his business time, attention and effort during normal business hours, excluding any periods of disability, vacation, or sick leave to which Executive is entitled, to the affairs of the Company and shall use his best efforts to promote the interests of the Company. 2.2 Other Activities. Executive may serve on civic or charitable boards or committees, deliver lectures, fulfill speaking engagements or teach at educational institutions, and manage personal investments; provided that such activities do not significantly interfere with the performance of Executive's duties under this Agreement. Executive may serve on corporate board or committees with the prior written consent of the Board. Article III. EMPLOYMENT PERIOD 3.1 Employment Period. Subject to the termination provisions hereinafter provided, the term of Executive's employment under this Agreement (the "Employment Period") shall begin on the Agreement Date and end on the Anniversary Date which is three years after such date or, if later, such later date to which the Employment Period is extended pursuant to the following sentence. On the date which is two and one-half years after the Agreement Date and thereafter, the Employment Period (assuming that an Expiration Notice to the effect that the Agreement shall expire on the Anniversary Date which is three years after the Agreement Date has not been delivered by the Executive or Company to the other prior to the date which is two and one-half years after the Agreement Date) shall be automatically extended each day by one day to create a new six month term until, at any time after the date which is two and one-half years after the Agreement Date the Company delivers written notice (an "Expiration Notice") to Executive or Executive delivers an Expiration Notice to the Company, in either case, to the effect that the Agreement shall expire on a date specified in the Expiration Notice (the "Expiration Date") that is not less than 6 months after the date the Expiration Notice is delivered to the Company or the Executive, respectively. The Employment Period shall end prior to the end of the Employment Period as described above upon the Executive's Date of Termination even if the Executive continues to provide the services described in Section 6.3(e). The -7- employment of Executive by the Company shall not be terminated other than in accordance with Article VI. Article IV. COMPENSATION 4.1 Salary. During the Employment Period, the Company shall pay or cause to be paid to Executive in accordance with its normal payroll practices (but not less frequently than monthly) an annual salary at a rate of $ 176,000 per year ("Base Salary"). During the Employment Period, the Base Salary shall be reviewed at least annually and may be increased from time to time as shall be determined by the Company. After any such increase, the term "Base Salary" shall thereafter refer to the increased amount. Any increase in Base Salary shall not limit or reduce any other obligation of the Company to Executive under this Agreement. Base Salary shall not be reduced at any time without the express written consent of Executive. 4.2 Annual Bonus. (a) The Company shall pay or cause to be paid to Executive an annual cash bonus ("Annual Bonus") in accordance with the terms hereof for each Fiscal Year which begins or ends during the Employment Period. Executive shall be eligible for an Annual Bonus based upon target performance goals (the "Target Annual Goals"), as determined by the Compensation Committee of the Board on an annual basis, which provides for a payment of at least 60.0% of Executive's Base Salary ("Target Annual Bonus") upon the Executive's achievement of the Target Annual Goals. The Target Annual Goals shall be set as described above no later than February 28 of each Fiscal Year except that in the case of the 2001 Fiscal Year if the Target Annual Goals have not been set prior to the Agreement Date, the Target Annual Goals shall be set within the first 60 days after the Agreement Date. (b) The Company shall pay or cause to be paid the entire Annual Bonus that is payable with respect to a Fiscal Year in cash as soon as practicable after the Company can determine whether and the degree to which Target Annual Goals have been achieved following the close of such Fiscal Year. Any such Annual Bonus shall in any event be paid within 90 days after the end of the Fiscal Year. Article V. OTHER BENEFITS 5.1 Stock Option, Restricted Stock and Other Equity Incentive Plans. In addition to Base Salary and an Annual Bonus, Executive shall be eligible to participate during the Employment Period in all stock option, restricted stock and other equity incentive plans, practices, policies and programs of the Company, in accordance with their terms as in effect from time to time. If a Change of Control occurs during the Employment Period (or, if applicable, the Transitional Services Period), all outstanding stock options, restricted stock and -8- other equity compensation granted to Executive (whether before, on or after the Agreement Date) shall become fully vested and exercisable. 5.2 Incentive, Savings and Retirement Plans. In addition to Base Salary and Annual Bonus, Executive shall be entitled to participate during the Employment Period in all incentives (other than those provided for in Section 5.1), savings and retirement plans, practices, policies and programs that are from time to time applicable to any other comparable senior executive of the Company including any supplemental executive retirement plan, in accordance with their terms as in effect from time to time. 5.3 Welfare Benefits. During the Employment Period, Executive and his family shall be eligible to participate in, and shall receive all benefits under, welfare benefit plans, practices, policies and programs provided by the Company (including medical, prescription, dental, disability, salary continuance, employee life, group life, dependent life, accidental death and travel accident insurance plans and programs) applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time. 5.4 Fringe Benefits. During the Employment Period, Executive shall be entitled to fringe benefits applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time. 5.5 Vacation. During the Employment Period, Executive shall be entitled to paid vacation time in accordance with the plans, practices, policies, and programs applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time, but in no event shall such vacation time be less than four weeks per calendar year. 5.6 Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable employment-related expenses incurred by Executive upon the receipt by the Company of an accounting in accordance with practices, policies, and procedures applicable to any comparable senior executive of the Company, in accordance with their terms as in effect from time to time. Article VI. TERMINATION BENEFITS 6.1 Termination for Cause or Other than for Good Reason, etc. If the Company terminates Executive's employment for Cause or Executive terminates his employment other than for Good Reason, death or Disability, the Company shall pay to Executive immediately after the Date of Termination an amount equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus and Executive shall not be entitled to receive any severance payment. 6.2 Termination for Death or Disability Prior to Change of Control or More than Seven Months after a Change of Control. If Executive's employment terminates due to his death or Disability prior to a Change of Control or more than seven months after a Change of Control, the Company shall pay to Executive or his Beneficiaries, as the case may be, (i) immediately -9- after the Date of Termination an amount which is equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus, and (ii) at the time described in Section 4.2(b), an amount which is equal to the Executive's Prorata Annual Bonus. 6.3 Termination Without Cause or for Good Reason Prior to Change of Control. In the event of a Termination Without Cause or a Termination for Good Reason prior to a Change of Control, Executive shall receive the following: (a) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus; (b) at the time described in Section 4.2(b), an amount which is equal to the Executive's Prorata Annual Bonus; (c) Base Salary payable on the same basis as in effect immediately prior to the Date of Termination for eighteen months following the Executive's Date of Termination; (d) immediately after the Date of Termination, a lump-sum amount in immediately available funds of any amount then payable to Executive pursuant to Article VIII; (e) during the period (the "Transitional Services Period") beginning on the Executive's Date of Termination and ending on the earliest of (i) eighteen months after the Executive's Date of Termination (ii) the date on which the Executive accepts a position with another employer, (iii) the date on which Executive breaches any of the provisions of Sections 7.1 and 7.2, and (iv) the date on which the Executive terminates his employment with the Company, the Executive shall remain an employee of the Company and shall only perform such transitional assignments for the Company as may be assigned to him from time to time by the Chief Executive Officer; (f) the benefits specified in Sections 5.2 (other than those provided by tax-qualified plans), 5.3 and 5.4 to which Executive is entitled as of the Date of Termination during the Transitional Services Period; provided that any coverage required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, ("COBRA") shall begin after the end of the Transitional Services Period; and (g) for purposes of the Company's stock option plans, restricted stock plans and other equity compensation plans, the Executive shall be considered an employee of the Company for all purposes under such plans through the end of the Transitional Services Period except Executive shall not be eligible for new grants under such plans. Notwithstanding any provisions of this Section 6.3 to the contrary, if Executive breaches any or all of the provisions of Sections 7.1 and 7.2, the payment of the Prorata Annual Bonus pursuant to Section 6.3(b) and the continuation of Base Salary and benefits pursuant to Sections 6.3(c), 6.3(f) (other than COBRA), and 6.3(g) shall cease upon such breach. In addition to the foregoing, and to protect and compensate the Company in the event of such breach by the -10- Executive, the Company shall be entitled to any and all remedies at law and equitable relief as described in Section 7.3. 6.4 Termination Without Cause or for Good Reason On or After Change of Control. In the event that the Executive has a Termination Without Cause or a Termination for Good Reason on or after a Change of Control, the Executive shall receive the following: (a) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to the sum of Executive's Accrued Base Salary, Accrued Annual Bonus and Prorata Annualized Bonus; (b) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to two times the sum of (i) the Executive's Base Salary and (ii) the Executive's Annualized Bonus; (c) the benefits specified in Sections 5.2 (other than those provided by tax-qualified plans), 5.3 and 5.4 to which Executive is entitled as of the Date of Termination for two years following his Date of Termination on the same basis as if Executive was employed by the Company during such two year period; provided, that if any of the foregoing benefits described in 5.3 cannot be provided by the Company under the applicable benefit plan, the Executive shall receive in lieu of such benefits a cash lump sum payment immediately after the Date of Termination equal to two times the Company's annual contributions and premiums on behalf of the Executive to such plan (determined based upon the year in which the Date of Termination occurs) together with a Tax Gross-Up Payment for any Taxes payable by Executive on such payments; and further provided that any coverage required by COBRA shall begin two years after the Date of Termination (or, if earlier, as of the date on which the Executive's benefit giving rise to COBRA ceases); and (d) immediately after the Date of Termination, a lump-sum amount in immediately available funds of any amount then payable to Executive pursuant to Article VIII. Notwithstanding any provisions of this Section 6.4 to the contrary, if Executive breaches any or all of the provisions of Sections 7.1 and 7.2, the continuation of benefits pursuant to Section 6.4(c) shall cease upon such breach and, to prevent the Executive's unjust enrichment, the Executive shall immediately pay the Company an amount equal to (i) the amount that the Executive received from the Company pursuant to this Section 6.4, multiplied by (ii) a fraction of which the numerator is the number of days remaining from the date of the breach through the first anniversary of the Executive's Termination of Employment and the denominator of which is 365. In addition to the foregoing, and to protect and compensate the Company in the event of such breach by the Executive, the Company shall be entitled to any and all remedies at law and equitable relief as described in Section 7.3. 6.5 Termination for Death or Disability within Seven Months of a Change of Control. In the event that the Executive has a Termination of Employment due to death or Disability within seven months after a Change of Control, the Executive's Beneficiaries shall receive the -11- compensation and benefits described in Section 6.4 except that the continued benefits (or cash in lieu thereof) described in Section 6.4(c) shall be limited to the welfare benefits specified in Section 5.3. 6.6 Imminent Control Change. If an Imminent Control Change Date (as defined below) occurs on or within 30 days after the date on which the Company delivers a Notice of Termination to Executive terminating Executive's employment not for Cause and if a Change of Control occurs within 180 days after delivery of the Notice, the Executive's Termination of Employment pursuant to the Notice, shall be deemed a Termination of Employment Without Cause on or after a Change of Control and the Executive's rights and obligations shall be determined under Section 6.4 rather than Section 6.3. Any payments or benefits to be received by the Executive pursuant to Section 6.4 shall be reduced by any payments or benefits made or provided pursuant to Section 6.3. If an Imminent Control Change Date occurs on or within 30 days after the date on which the Executive has a Termination of Employment due to death or Disability and if a Change of Control occurs within 180 days after death or Disability, the Executive's Termination of Employment due to death or Disability shall be deemed a Termination of Employment due to death or Disability on or after a Change of Control and the Executive's Beneficiaries' rights and obligations shall be determined under Section 6.5 rather than Section 6.2. Any payments or benefits to be received by the Executive's Beneficiaries pursuant to Section 6.5 shall be reduced by any payments or benefits made or provided pursuant to Section 6.2. "Imminent Control Change Date" means any date on which occurs (a) a presentation to the Company's stockholders generally or any of the Company's directors or executive officers of a proposal or offer for a Change of Control, (b) the public announcement (whether by advertisement, press release, press interview, public statement, SEC filing or otherwise) of a proposal or offer for a Change of Control, or (c) such proposal or offer remains effective and unrevoked. 6.7 Other Rights. This Agreement shall not prevent or limit Executive's continuing or future participation in any benefit, bonus, incentive or other plan, program or policy provided by the Company and for which Executive may qualify, nor shall this Agreement limit or otherwise affect such rights as Executive may have under any other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, program or policy and any other payment or benefit required by law at or after the Date of Termination shall be payable in accordance with such plan, program or policy or applicable law except as expressly modified by this Agreement. 6.8 Termination Rights. Executive recognizes and agrees that the Company has the right to terminate his employment for any reason or no reason and that upon such termination the Executive's sole right is to receive compensation and benefits in accordance with the terms of this Agreement. Article VII. COVENANTS 7.1 Non-Disclosure and Non-Solicitation. Executive acknowledges that the successful marketing and development of the Company's products requires substantial time and -12- expense. Such efforts utilize and generate valuable confidential and proprietary information, of which Executive will obtain knowledge during the course of his employment with the Company. As used herein, "Confidential Information" means any information of the Company that the Company considers to be proprietary and treats as confidential or information of any third party that the Company is under an obligation to keep confidential, including but not limited to the following: (i) trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, (ii) employment status, salaries and other personnel information, decisions to offer employment, pre-employment testing and screening results, citizenship status, disability status, performance issues, executive evaluations, medical problems of executives and executives' families, garnishments and levies against wages, contents of employment agreements, statements regarding the financial condition of the Company or any subsidiary or affiliated entity, payments made to or expenses incurred by the Company or any of its executives, shareholders or directors, discounts given by the Company, vendors and other parties, minutes of Board meetings of the Company or any subsidiary or affiliated entities, contents of contracts, legal matters by or against the Company or any subsidiary or affiliated entities, business strategies, plans, proposals, names of customers and potential customers; and (iii) other information or materials of the Company marked or noticed by the Company as being confidential, whether constituting a trade secret or not, and whether proprietary or not, which are of value to the Company. For purposes of this Agreement, Confidential Information includes the foregoing and other information protected under the Illinois Trade Secrets Act. Confidential Information does not include: (i) information that at the time of disclosure is in the public domain through no fault of Executive; (ii) information received from a third party outside of the Company that was disclosed without a breach of any confidentiality obligation; (iii) information approved for public release by written authorization of the Company; or (iv) information that is required by law or an order of any court, agency or proceeding to be disclosed. Executive acknowledges and agrees that the Company shall retain exclusive ownership of all right, title, and interest in the Confidential Information, including any and all worldwide copyrights, trade secrets, patent, and confidential and proprietary information rights. Executive agrees to undertake the following obligations, which Executive acknowledges to be reasonably designed to protect the Company's legitimate business interests without unnecessarily or unreasonably restricting Executive's post-employment opportunities: (a) Executive agrees that he will not at any time, whether during or after the cessation of his employment, reveal or permit any other person or entity to reveal, any of the Confidential Information to any person or any entity, except, and only to the extent, as may be required in the ordinary course of performing Executive's assigned duties as an Executive of the Company, and Executive agrees to keep secret, and take all necessary precautions against disclosure of, all Confidential Information and all matters entrusted to him and not to use or attempt to use any Confidential Information in any manner that may cause injury or loss, or may be calculated to cause injury or loss, whether directly or indirectly, to the Company or its customers; (b) Executive agrees that during and after his employment he shall not remove, copy, duplicate or otherwise reproduce, use or permit to be used any notes, memoranda, reports, lists, records, drawings, sketches, specifications, software programs, data, documentation or other materials of any nature relating to any matter within the -13- scope of the business of the Company or concerning any of its dealings or affairs except as required to perform Executive's duties for the Company; (c) Upon cessation of his employment relationship with the Company, Executive shall immediately deliver to the Company all Confidential Information and other materials relating to the Company in his possession or delivered to him by the Company, including computer programs, files, notes, records, memoranda, reports, lists, drawings, sketches, specifications, data, charts, and other documents, materials and things ("Materials"), whether or not containing Confidential Information, whether or not prepared by Executive, it being agreed that all Materials shall be and remain the sole and exclusive property of the Company; (d) Without limiting the obligations of Section 7.1(c), Executive agrees that while Executive is employed by the Company prior to his Date of Termination and for a period of one year following his Date of Termination he will not, whether alone or as employee, owner, partner, officer, director, consultant, agent, executive, independent contractor, or stockholder of any firm, corporation or other commercial enterprise, directly or indirectly solicit business from: (i) any customer of the Company with which Executive had contact, participated in the contact, or about which Executive had knowledge of Confidential Information by reason of Executive's employment with the Company within the one year period preceding the Date of Termination, or (ii) any current customer prospect of the Company for whom Executive directly or indirectly assisted in the preparation or submission of a proposal made by the Company to such customer prospect during the one year period preceding the Date of Termination, unless the Company acknowledges in writing its intent not to further pursue such customer prospect; provided, further, that Executive shall, however, be permitted to own securities of any public company not in excess of 5% of any class of such securities and to own stock, partnership interests or other securities of any non-public entity not in excess of 5% of any class of such securities, and such ownership shall not be considered to be in competition with the Company; and (e) Except as may be required in the ordinary course of performing his duties as an employee of the Company, while employed prior to his Date of Termination and during the one year period immediately following the Date of Termination, Executive shall not, directly or indirectly, solicit or attempt to solicit any employee of the Company to work for any person, partnership or entity other than the Company, or engage in any activity that would cause any such employee to violate any agreement with the Company, or dissuade, or attempt to dissuade, any such employee from faithfully discharging such employee's contractual and fiduciary obligations to serve the Company's interests with undivided loyalty. 7.2 Non Competition. Without limiting the obligation imposed by Section 7.1, and to more fully protect the Confidential Information, Executive hereby agrees that while he is employed by the Company prior to the Date of Termination and for a period of one year following the Date of Termination, he will not, directly or indirectly, anywhere in the world where the Company conducts business, render services to any Conflicting Organization in any capacity in which the Confidential Information of the Company would reasonably be considered -14- to be useful to the Conflicting Organization; provided, however, that Executive may render services to a Conflicting Organization whose business is diversified (and which has separate and distinct divisions), as long as such services are being rendered to a part of the business that is separate and distinct from the part of the business that renders such person or entity a Conflicting Organization. (a) If, at the time of enforcement of Sections 7.1 and 7.2, a court shall hold that the duration, scope, area or activity restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope, area or activity restrictions reasonable and enforceable under such circumstances shall be substituted for the stated duration, scope, area or activity restrictions. (b) "Conflicting Organization" means for the purposes of this Section, any person or entity which is engaged in or about to become engaged in, research, development, production, manufacturing, importation, marketing, licensing, selling, or servicing of a Conflicting Product. (c) "Conflicting Product" means any product, process, system or service of any person or organization other than the Company or an Affiliate, in existence or under development, which is the same as or similar to or competes with a product, process, system or service upon which Executive works or has worked during the three year period ending on his Date of Termination, or about which Executive acquired or acquires Confidential Information. 7.3 Remedies. Executive recognizes and agrees that a breach of any or all of the provisions of Sections 7.1 and 7.2 will constitute immediate and irreparable harm to the Company for which damages cannot be readily calculated and for which damages are an inadequate remedy. Accordingly, Executive acknowledges that in addition to any and all remedies at law, the Company shall be entitled to specific performance or injunctive or other equitable relief to prevent the breach or threatened breach of Executive's obligations under this Agreement. 7.4 Intellectual Property. During the employment period, Executive shall disclose immediately to the Company all ideas, inventions and business plans that he makes, conceives, discovers or develops during the course of his employment with the Company, including any inventions, modifications, discoveries, developments, improvements, computer programs, processes, products or procedures (whether or not protectable upon application by copyright, patent, trademark, trade secret or other proprietary rights) ("Work Product") that: (i) relate to the business of the Company or any customer or supplier to the Company or any of the products or services being developed, manufactured, sold or otherwise provided by the Company or that may be used in relation therewith; or (ii) result from tasks assigned to Executive by the Company; or (iii) result from the use of the premises or personal property (whether tangible or intangible) owned, leased or contracted for by the Company. Executive agrees that any Work Product shall be the property of the Company and, if subject to copyright, shall be considered a "work made for hire" within the meaning of the Copyright Act of 1976, as amended (the "Act"). If and to the extent that any such Work Product is found as a matter of law not to be a "work made for hire" within the meaning of the Act, Executive expressly assigns to the Company all right, title and -15- interest in and to the Work Product, and all copies thereof, and the copyright, patent, trademark, trade secret and all their proprietary rights in the Work Product, without further consideration, free from any claim, lien for balance due or rights of retention thereto on the part of Executive. (a) To the extent applicable, pursuant to Illinois Executive Patent Act, the Company hereby notifies Executive that the preceding paragraph does not apply to any inventions for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on the Executive's own time, unless: (i) the invention relates (a) to the Company's business, or (b) to the Company's actual or demonstrably anticipated research or development, or (ii) the invention results from any work performed by the Executive for the Company. (b) Executive agrees that upon disclosure of Work Product to the Company, Executive will, during his employment and at any time thereafter, at the request and cost of the Company all such documents and perform all such acts as the Company or its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world, and when so obtained or vested to renew and restore the same; and (ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection. (c) In the event that the Company is unable, after reasonable effort, to secure Executive's signature on any letters patent, copyright or other analogous protection relating to Work Product, whether because of Executive's physical or mental incapacity or for any other reason whatsoever, Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney-in-fact, to act for and on his behalf to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright and other analogous protection with the same legal force and effect as if personally executed by Executive. Article VIII. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY 8.1 Tax Gross-Up Payment. If at any time or from time to time it shall be determined that any payment to Executive pursuant to this Agreement or any other payment or benefit from the Company, any Affiliate, any shareholder of the Company or any other person would be subject to the excise tax imposed by Section 4999 of the Code or any similar tax payable under any United States federal, state, local, foreign or other law, then Executive shall receive and the Company shall pay or cause to be paid a Tax Gross-Up Payment with respect to all such excise taxes and other Taxes. The Tax Gross-Up Payment is intended to compensate Executive for all such excise taxes and any federal, state, local, foreign or other income, employment, or excise taxes or other taxes payable by Executive with respect to the Tax Gross-Up Payment. -16- Article IX. MISCELLANEOUS 9.1 Approvals. The Company represents and warrants to Executive it has taken all corporate action necessary to authorize this Agreement. 9.2 Full Settlement. The exclusive method for the Company to terminate its obligations to provide compensation or benefits to Executive pursuant to Articles IV and V of this Agreement is to terminate Executive's employment in compliance with all applicable requirements of Sections 6.1, 6.2, 6.3, 6.4 or 6.5 of this Agreement, as applicable, and to make the payments and provide the benefits specified in such applicable Section. 9.3 No Mitigation. In no event shall Executive be obligated to seek other employment or take any other action to mitigate the amounts payable to Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned as a result of Executive's employment by another employer, except that any continued welfare benefits provided for by Section 6.3(f) or Section 6.4(c) shall not duplicate any benefits that are provided to Executive and his family by such other employer and shall be secondary to any coverage provided by such other employer. 9.4 Enforcement. (a) If Executive incurs legal, accounting, expert witness or other fees, costs or expenses in an effort to establish entitlement to, or obtain compensation or benefits or Tax Gross-Up Payment under this Agreement, the Company shall reimburse Executive for such fees and expenses if the Executive prevails (after exhaustion of all available judicial remedies) and provide the Executive with a Tax Gross-Up Payment for any Taxes payable by Executive on such reimbursements. (b) If the Company fails to pay any amount provided under this Agreement when due, the Company shall pay interest on such amount at an annual rate equal to the lesser of (i) (A) the highest rate of interest charged by the Company's principal lender on its revolving credit agreements plus 200 basis points, or (B) in the absence of such a lender, 200 basis points over the prime commercial lending rate announced by The Wall Street Journal in effect from time to time during the period of such nonpayment, or (ii) the highest legally-permissible interest rate allowed to be charged under applicable law. 9.5 Release. Notwithstanding any provisions of this Agreement to the contrary, the Company's obligations to make payments and to provide benefits under Sections 6.3, 6.4 and 6.5, other than the obligation to pay Accrued Base Salary and Accrued Annual Bonus, are expressly conditioned upon the Executive's execution of a mutual release and waiver substantially in the form attached hereto as Exhibit A and the expiration of the Revocation Period as defined in the release. 9.6 Beneficiary. If Executive dies prior to receiving all of the amounts payable to him in accordance with the terms and conditions of this Agreement, such amounts shall be paid -17- to the beneficiary ("Beneficiary") designated by Executive in writing to the Company during his lifetime, or if no such Beneficiary is designated, to Executive's estate. Such payments shall be made in a lump sum to the extent so payable and, to the extent not payable in a lump sum, in accordance with the terms of this Agreement. Such payments shall not be less than the amount payable to Executive as if Executive had lived to the date of payment and were the payee. Executive, without the consent of any prior Beneficiary, may change his designation of Beneficiary or Beneficiaries at any time or from time to time by submitting to the Company a new designation in writing. 9.7 Assignment; Successors. The Company may not assign its respective rights and obligations under this Agreement without the prior written consent of Executive except to a successor of the Company's business. This Agreement shall be binding upon and inure to the benefit of Executive, his estate and Beneficiaries, the Company and the successors and permitted assigns of the Company. 9.8 Non-alienation. Except as is otherwise expressly provided herein, benefits payable under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by Executive, and any such attempt to dispose of any right to benefits payable hereunder shall be void. 9.9 Severability. If all or any part of this Agreement is declared to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of this Agreement not declared to be unlawful or invalid. Any provision so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such provision to the fullest extent possible while remaining lawful and valid. 9.10 Amendment; Waiver. This Agreement shall not be amended or modified except by written instrument executed by the Company and Executive. A waiver of any term, covenant or condition contained in this Agreement shall not be deemed a waiver of any other term, covenant or condition, and any waiver of any default in any such term, covenant or condition shall not be deemed a waiver of any later default thereof or of any other term, covenant or condition. 9.11 Notices. All notices hereunder shall be in writing and delivered by hand, by nationally-recognized delivery service that guarantees overnight delivery, or by first-class, registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Company, to: Chief Executive Officer Amcol International Corporation One North Arlington 1500 West Shore Drive Arlington Heights, IL 60004-7803 If to Executive, to: (at his most recent home address or facsimile number on file with the Company) -18- Either party may from time to time designate a new address by notice given in accordance with this Section. Notice shall be effective when actually received by the addressee. 9.12 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument. 9.13 Captions. The captions of this Agreement are not a part of the provisions hereof and shall have no force or effect. 9.14 Entire Agreement. This Agreement forms the entire agreement between the parties hereto with respect to the subject matter contained in the Agreement and shall supersede all prior agreements, promises and representations regarding employment, compensation, severance or other payments contingent upon termination of employment, whether in writing or otherwise, including but not limited to that certain change of control agreement dated September 22, 2000 by and between the Company and the Executive. 9.15 Applicable Law. This Agreement shall be interpreted and construed in accordance with the laws of the State of Illinois, without regard to its choice of law principles. 9.16 Survival of Executive's Rights. All of Executive's rights hereunder, including his rights to compensation and benefits, and his obligations under Article VI and Article VII hereof, shall survive the termination of Executive's employment or the termination of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. AMCOL INTERNATIONAL CORPORATION By: ------------------------------------- Its: Chief Executive Officer ------------------------------------ EXECUTIVE ----------------------------------------- Peter L. Maul -19- EX-10.28 5 dex1028.txt EMPLOYMENT AGMT. DATED 3/15/02 - CASTAGNA EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (the "Agreement") dated as of March 15, 2002 ("Agreement Date") by and between Amcol International Corporation, a Delaware corporation (the "Company"), and Gary L. Castagna ("Executive"), a resident of Illinois. In consideration of the mutual agreements contained herein, the Company and Executive agree as follows: Article I. DEFINITIONS The terms set forth below have the following meanings (such meanings to be applicable to both the singular and plural forms, except where otherwise expressly indicated): 1.1 "Accrued Annual Bonus" means the amount of any Annual Bonus earned but not yet paid with respect to any Fiscal Year ended prior to the Date of Termination. 1.2 "Accrued Base Salary" means the amount of Executive's Base Salary which is accrued but not yet paid as of the Date of Termination. 1.3 "Affiliate" means any Person that directly or indirectly controls, is controlled by, or is under common control with, the applicable Person. For the purposes of this definition, the term "control" when used with respect to any Person means the power to direct or cause the direction of management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. 1.4 "Agreement" - see the introductory paragraph of this Agreement. 1.5 "Agreement Date" -- see the introductory paragraph of this Agreement. 1.6 "Anniversary Date" means any annual anniversary of the Agreement Date. 1.7 "Annual Bonus" - see Section 4.2. 1.8 "Annualized Bonus" means, as of any date, the greatest of the following amounts that is determinable and applicable: (i) the Target Annual Bonus for the Fiscal Year during which the Date of Termination occurs; and (ii) the average of the Annual Bonuses paid or payable to Executive in respect of the three most recent Fiscal Years ended on or before such date; provided that, in subsection (ii) above, annual bonuses paid in respect of Executive prior to the Agreement Date shall be included in such computation if, as of such date, three years have not elapsed since the Agreement Date; and further provided that if the Executive has not been employed by the Company for three full Fiscal Years ended on or before the Date of Termination, any bonus payable in respect of a partial Fiscal Year shall be annualized and the average of the annual bonuses shall be determined based upon such annualized bonus and the bonuses paid or payable to the Executive in respect of any other full Fiscal Years. 1.9 "Base Salary" -- see Section 4.1. 1.10 "Beneficial Owner" means such term as defined in Rule 13d-3 (or any successor rule) of the SEC under the Exchange Act. 1.11 "Beneficiary" - see Section 9.6. 1.12 "Board" means the Board of Directors of the Company. 1.13 "Cause" means any of the following: (a) Executive's commission of a felony or misdemeanor that involves fraud, dishonesty or moral turpitude, (b) Executive's willful or intentional material breach of this Agreement, or (c) willful or intentional material misconduct by Executive in the performance of his duties under this Agreement. For purposes of clauses (b) and (c) of the preceding sentence, Cause shall not include bad judgment or negligence which results from the Executive's good faith efforts to perform his duties. 1.14 "Change of Control" means any one or more of the following: (a) any person (as such term is used in Rule 13d-5 under the Exchange Act) or group (as such term is defined in Section 3(a)(9) and 13(d)(3) of the Exchange Act), other than a Subsidiary, any employee benefit plan (or any related trust) of the Company or any of its Subsidiaries or any Excluded Person, becomes the Beneficial Owner of 50.1% or more of the common stock of the Company or of Voting Securities representing 50.1% or more of the combined voting power of the Company (such a person or group, a "50.1% Owner"), except that (i) no Change of Control shall be deemed to have occurred solely by reason of such beneficial ownership by a corporation with respect to which both more than 49.9% of the common stock of such corporation and Voting Securities representing more than 49.9% of the aggregate voting power of such corporation are then owned, directly or indirectly, by the persons who were the direct or indirect owners of the common stock and Voting Securities of the Company immediately before such acquisition in substantially the same proportions as their ownership, immediately before such acquisition, of the common stock and Voting Securities of the Company, as the case may be and (ii) such corporation shall not be deemed a 50.1% Owner; or (b) the Incumbent Directors (determined using the Agreement Date as the baseline date) cease for any reason to constitute at least one-half of the directors of the Company then serving; or -2- (c) immediately prior to the consummation by the Company of a merger, reorganization, consolidation, or similar transaction, or a plan or agreement for the sale or other disposition of 50.1% of the consolidated assets of the Company or a plan of liquidation of the Company (any of the foregoing transactions, a "Reorganization Transaction") which is not an Exempt Reorganization Transaction (provided however, there shall be no Change of Control unless the Reorganization Transaction is actually consummated); or (d) the approval by the stockholders of the Company of a plan of liquidation of the Company which, based on information included in the proxy and other written materials distributed to the Company's stockholders in connection with the solicitation by the Company of such stockholder approval, is not expected to qualify as an Exempt Reorganization Transaction; or (e) if the Executive's primary responsibility is being the President of a Subsidiary, the sale by the Company of all of its stock in the Subsidiary or the sale or other disposition of all of the assets of the Subsidiary. Notwithstanding the occurrence of any of the foregoing events, a Change of Control shall not occur with respect to a Executive if, in advance of such event, the Executive agrees in writing that such event shall not constitute a Change of Control. 1.15 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.16 "Company" -- see the introductory paragraph to this Agreement. 1.17 "Date of Termination" means the date of the receipt of the Notice of Termination by Executive (if such Notice is given by the Company) or by the Company (if such Notice is given by Executive), or any later date, not more than 15 days after the giving of such Notice, specified in such notice; provided, however, that: (i) if Executive's employment is terminated by reason of death, the Date of Termination shall be the date of Executive's death; and (ii) if Executive's employment is terminated by reason of Disability, the Date of Termination shall be the 30th day after Executive's receipt of the physician's certification of Disability, unless, before such date, Executive shall have resumed the full-time performance of Executive's duties; and (iii) if Executive terminates his employment without Good Reason or if the Company terminates Executive's employment without Cause, the Date of Termination shall be the 90th day after the giving of such Notice; and (iv) if no Notice of Termination is given, the Date of Termination shall be the last date on which Executive is employed by the Company. 1.18 "Disability" means a mental or physical condition which renders Executive unable or incompetent to carry out the material job responsibilities which such Executive held or -3- the material duties to which Executive was assigned at the time the disability was incurred, which has existed for at least six months and which in the certified opinion of a physician mutually agreed upon by the Company and Executive (which agreement neither party shall unreasonably withhold) is expected to be permanent or to last for an indefinite duration or a duration in excess of six months. 1.19 "Employment Period" - see Section 3.1. 1.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.21 "Excluded Person" means any of the Paul Bechtner Trust, Everett P. Weaver, William D. Weaver or any Named Executive, any Affiliates or Family Member of any of the foregoing and any group (as such term is defined in Section 3(a)(9) and 13(d)(3) of the Exchange Act) of which any of the foregoing is a member. 1.22 "Executive" - see the introductory paragraph of this Agreement. 1.23 "Exempt Reorganization Transaction" means a Reorganization Transaction which results in (i) the Persons who were the direct or indirect owners of the outstanding common stock and Voting Securities of the Company immediately before such Reorganization Transaction becoming, immediately after the consummation of such Reorganization Transaction, the direct or indirect owners of both more than 49.9% of the then-outstanding common stock of the Surviving Corporation and Voting Securities representing more than 49.9% of the aggregate voting power of the Surviving Corporation, in substantially the same respective proportions as such Persons' ownership of the common stock and Voting Securities of the Company immediately before such Reorganization Transaction; or (ii) the Excluded Person owning 50% or more of the common stock of the Surviving Corporation or Voting Securities representing 50% or more of the combined voting power of the Surviving Corporation. 1.24 "Family Member" means, with respect to the applicable Person, a spouse, ancestor, lineal descendant, or spouse of a lineal descendant, including without limitation descendants by adoption. 1.25 "Fiscal Year" means the fiscal year used in connection with the preparation of the consolidated financial statements of the Company. 1.26 "Good Reason" means the occurrence of any one of the following events unless Executive specifically agrees in writing that such event shall not be Good Reason: (a) any material breach of the Agreement by the Company, provided, however, that no breach of this Agreement shall constitute Good Reason unless Executive gives the Company 30 days' prior written notice of such breach and the Company fails to cure such breach within the 30-day period; (b) the failure of either the Company to assign this Agreement to a successor of the Company or failure of a successor of the Company to expressly assume and agree to be bound by the Agreement; or -4- (c) a Termination of Employment by Executive for any reason or no reason during the 30-day period commencing six months after a Change of Control. In the event of the occurrence or omission constituting Good Reason other than an event described in subsection (c) above, Executive may within 90 days after such event occurs notify the Company of the events constituting such Good Reason by a Notice of Termination. In the event of the occurrence constituting Good Reason in subsection (c) above, Executive may within the 30 day period commencing six months after a Change of Control notify the Company of the events constituting such Good Reason by a Notice of Termination. 1.27 "including" means including without limitation. 1.28 "Incumbent Directors" means, as of any specified baseline date, individuals then serving as members of the Board who were members of the Board as of the date immediately preceding such baseline date; provided that any subsequently-appointed or elected member of the Board whose election, or nomination for election by stockholders of the Company or the Surviving Corporation, as applicable, was approved by a vote or written consent of at least one-half of the directors then comprising the Incumbent Directors shall also thereafter be considered an Incumbent Director, unless the initial assumption of office of such subsequently-elected or appointed director was in connection with (i) an actual or threatened election contest, including a consent solicitation, relating to the election or removal of one or more members of the Board, (ii) a "tender offer" (as such term is used in Section 14(d) of the Exchange Act), (iii) a proposed Reorganization Transaction, or (iv) a request, nomination or suggestion of any Beneficial Owner of Voting Securities representing 35% or more of the aggregate voting power of the Voting Securities of the Company or the Surviving Corporation, as applicable. 1.29 "Named Executive" means any individual listed on Exhibit A except to the extent the individual had a termination of employment not less than 120 days prior to the applicable event potentially constituting a Change of Control and any other employee or officer of the Company designated by the Board and who is a party to an agreement substantially in the same form as this Agreement (with variation in the amount of compensation and benefits payable under the agreement) and entered into by the employee or officer not less than 120 days prior to the applicable event potentially constituting a Change of Control. 1.30 "Notice of Termination" means a written notice given in accordance with Section 9.11 which sets forth (a) the specific termination provision in this Agreement relied upon by the party giving such notice, (b) in reasonable detail the specific facts and circumstances claimed to provide a basis for such Termination of Employment, and (c) if the Date of Termination is other than the date of receipt of such Notice of Termination, the Date of Termination. 1.31 "Person" means any individual, sole proprietorship, partnership, joint venture, limited liability company, trust, unincorporated organization, corporation, institution, public benefit corporation, entity or government instrumentality, division, agency, body or department. -5- 1.32 "Prorata Annual Bonus" means the product of (i) the Annual Bonus that Executive would have earned for the Fiscal Year during which the Executive's Date of Termination occurs based upon the Company's achievement of the Target Annual Goals during such Fiscal Year, multiplied by (ii) a fraction of which the numerator is the number of days which have elapsed in such Fiscal Year through the Date of Termination and the denominator of which is 365. 1.33 "Prorata Annualized Bonus" means the product of (i) the Executive's Annualized Bonus, multiplied by (ii) a fraction of which the numerator is the number of days which have elapsed in such Fiscal Year through the Date of Termination and the denominator of which is 365. 1.34 "Reorganization Transaction" -- see the definition of "Change of Control." 1.35 "Subsidiary" means, with respect to any Person, (a) any corporation of which more than 50% of the Voting Securities are at the time, directly or indirectly, owned by such Person, and (b) any partnership or limited liability company in which such Person has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%. 1.36 "Surviving Corporation" means the corporation resulting from a Reorganization Transaction or, if securities representing more than 50% of the aggregate Voting Power of such resulting corporation are directly or indirectly owned by another corporation, such other corporation. 1.37 "Target Annual Bonus" -- see Section 4.2. 1.38 "Target Annual Goals" -- see Section 4.2. 1.39 "Tax Gross-Up Payment" means an amount payable to Executive such that after payment of Taxes on such amount there remains a balance sufficient to pay the Taxes being reimbursed. 1.40 "Taxes" means the incremental federal, state, local and foreign income, employment, excise and other taxes payable by Executive with respect to any applicable item of income. 1.41 "Termination For Good Reason" means a Termination of Employment by Executive for a Good Reason. 1.42 "Termination of Employment" means a termination by the Company or Executive of Executive's employment. 1.43 "Termination Without Cause" means a Termination of Employment by the Company for any reason other than Cause or Executive's death or Disability. 1.44 "Transitional Services Period" - see Section 6.3. -6- 1.45 "Voting Securities" of a corporation means securities of such corporation that are entitled to vote generally in the election of directors of such corporation, but not including any other class of securities of such corporation that may have voting power by reason of the occurrence of a contingency. Article II. DUTIES 2.1 Duties. During the Employment Period, the Company shall employ Executive as Chief Financial Officer, and in connection therewith, the Executive shall perform such duties and responsibilities as may be assigned to him from time to time by, or under the authority of, the Board, the Chief Executive Officer of the Company or any of their designees, and in the absence of such assignment, such duties customary to such office as is necessary to the operations of the Company. Executive shall devote all of his business time, attention and effort during normal business hours, excluding any periods of disability, vacation, or sick leave to which Executive is entitled, to the affairs of the Company and shall use his best efforts to promote the interests of the Company. 2.2 Other Activities. Executive may serve on civic or charitable boards or committees, deliver lectures, fulfill speaking engagements or teach at educational institutions, and manage personal investments; provided that such activities do not significantly interfere with the performance of Executive's duties under this Agreement. Executive may serve on corporate board or committees with the prior written consent of the Board. Article III. EMPLOYMENT PERIOD 3.1 Employment Period. Subject to the termination provisions hereinafter provided, the term of Executive's employment under this Agreement (the "Employment Period") shall begin on the Agreement Date and end on the Anniversary Date which is three years after such date or, if later, such later date to which the Employment Period is extended pursuant to the following sentence. On the date which is two and one-half years after the Agreement Date and thereafter, the Employment Period (assuming that an Expiration Notice to the effect that the Agreement shall expire on the Anniversary Date which is three years after the Agreement Date has not been delivered by the Executive or Company to the other prior to the date which is two and one-half years after the Agreement Date) shall be automatically extended each day by one day to create a new six month term until, at any time after the date which is two and one-half years after the Agreement Date the Company delivers written notice (an "Expiration Notice") to Executive or Executive delivers an Expiration Notice to the Company, in either case, to the effect that the Agreement shall expire on a date specified in the Expiration Notice (the "Expiration Date") that is not less than 6 months after the date the Expiration Notice is delivered to the Company or the Executive, respectively. The Employment Period shall end prior to the end of the Employment Period as described above upon the Executive's Date of Termination even if the Executive continues to provide the services described in Section 6.3(e). The -7- employment of Executive by the Company shall not be terminated other than in accordance with Article VI. Article IV. COMPENSATION 4.1 Salary. During the Employment Period, the Company shall pay or cause to be paid to Executive in accordance with its normal payroll practices (but not less frequently than monthly) an annual salary at a rate of $ 238,000 per year ("Base Salary"). During the Employment Period, the Base Salary shall be reviewed at least annually and may be increased from time to time as shall be determined by the Company. After any such increase, the term "Base Salary" shall thereafter refer to the increased amount. Any increase in Base Salary shall not limit or reduce any other obligation of the Company to Executive under this Agreement. Base Salary shall not be reduced at any time without the express written consent of Executive. 4.2 Annual Bonus. (a) The Company shall pay or cause to be paid to Executive an annual cash bonus ("Annual Bonus") in accordance with the terms hereof for each Fiscal Year which begins or ends during the Employment Period. Executive shall be eligible for an Annual Bonus based upon target performance goals (the "Target Annual Goals"), as determined by the Compensation Committee of the Board on an annual basis, which provides for a payment of at least 60.0% of Executive's Base Salary ("Target Annual Bonus") upon the Executive's achievement of the Target Annual Goals. The Target Annual Goals shall be set as described above no later than February 28 of each Fiscal Year except that in the case of the 2001 Fiscal Year if the Target Annual Goals have not been set prior to the Agreement Date, the Target Annual Goals shall be set within the first 60 days after the Agreement Date. (b) The Company shall pay or cause to be paid the entire Annual Bonus that is payable with respect to a Fiscal Year in cash as soon as practicable after the Company can determine whether and the degree to which Target Annual Goals have been achieved following the close of such Fiscal Year. Any such Annual Bonus shall in any event be paid within 90 days after the end of the Fiscal Year. Article V. OTHER BENEFITS 5.1 Stock Option, Restricted Stock and Other Equity Incentive Plans. In addition to Base Salary and an Annual Bonus, Executive shall be eligible to participate during the Employment Period in all stock option, restricted stock and other equity incentive plans, practices, policies and programs of the Company, in accordance with their terms as in effect from time to time. If a Change of Control occurs during the Employment Period (or, if applicable, the Transitional Services Period), all outstanding stock options, restricted stock and -8- other equity compensation granted to Executive (whether before, on or after the Agreement Date) shall become fully vested and exercisable. 5.2 Incentive, Savings and Retirement Plans. In addition to Base Salary and Annual Bonus, Executive shall be entitled to participate during the Employment Period in all incentives (other than those provided for in Section 5.1), savings and retirement plans, practices, policies and programs that are from time to time applicable to any other comparable senior executive of the Company including any supplemental executive retirement plan, in accordance with their terms as in effect from time to time. 5.3 Welfare Benefits. During the Employment Period, Executive and his family shall be eligible to participate in, and shall receive all benefits under, welfare benefit plans, practices, policies and programs provided by the Company (including medical, prescription, dental, disability, salary continuance, employee life, group life, dependent life, accidental death and travel accident insurance plans and programs) applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time. 5.4 Fringe Benefits. During the Employment Period, Executive shall be entitled to fringe benefits applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time. 5.5 Vacation. During the Employment Period, Executive shall be entitled to paid vacation time in accordance with the plans, practices, policies, and programs applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time, but in no event shall such vacation time be less than three weeks per calendar year. 5.6 Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable employment-related expenses incurred by Executive upon the receipt by the Company of an accounting in accordance with practices, policies, and procedures applicable to any comparable senior executive of the Company, in accordance with their terms as in effect from time to time. Article VI. TERMINATION BENEFITS 6.1 Termination for Cause or Other than for Good Reason, etc. If the Company terminates Executive's employment for Cause or Executive terminates his employment other than for Good Reason, death or Disability, the Company shall pay to Executive immediately after the Date of Termination an amount equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus and Executive shall not be entitled to receive any severance payment. 6.2 Termination for Death or Disability Prior to Change of Control or More than Seven Months after a Change of Control. If Executive's employment terminates due to his death or Disability prior to a Change of Control or more than seven months after a Change of Control, the Company shall pay to Executive or his Beneficiaries, as the case may be, (i) immediately -9- after the Date of Termination an amount which is equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus, and (ii) at the time described in Section 4.2(b), an amount which is equal to the Executive's Prorata Annual Bonus. 6.3 Termination Without Cause or for Good Reason Prior to Change of Control. In the event of a Termination Without Cause or a Termination for Good Reason prior to a Change of Control, Executive shall receive the following: (a) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus; (b) at the time described in Section 4.2(b), an amount which is equal to the Executive's Prorata Annual Bonus; (c) Base Salary payable on the same basis as in effect immediately prior to the Date of Termination for eighteen months following the Executive's Date of Termination; (d) immediately after the Date of Termination, a lump-sum amount in immediately available funds of any amount then payable to Executive pursuant to Article VIII; (e) during the period (the "Transitional Services Period") beginning on the Executive's Date of Termination and ending on the earliest of (i) eighteen months after the Executive's Date of Termination (ii) the date on which the Executive accepts a position with another employer, (iii) the date on which Executive breaches any of the provisions of Sections 7.1 and 7.2, and (iv) the date on which the Executive terminates his employment with the Company, the Executive shall remain an employee of the Company and shall only perform such transitional assignments for the Company as may be assigned to him from time to time by the Chief Executive Officer; (f) the benefits specified in Sections 5.2 (other than those provided by tax-qualified plans), 5.3 and 5.4 to which Executive is entitled as of the Date of Termination during the Transitional Services Period; provided that any coverage required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, ("COBRA") shall begin after the end of the Transitional Services Period; and (g) for purposes of the Company's stock option plans, restricted stock plans and other equity compensation plans, the Executive shall be considered an employee of the Company for all purposes under such plans through the end of the Transitional Services Period except Executive shall not be eligible for new grants under such plans. Notwithstanding any provisions of this Section 6.3 to the contrary, if Executive breaches any or all of the provisions of Sections 7.1 and 7.2, the payment of the Prorata Annual Bonus pursuant to Section 6.3(b) and the continuation of Base Salary and benefits pursuant to Sections 6.3(c), 6.3(f) (other than COBRA), and 6.3(g) shall cease upon such breach. In addition to the foregoing, and to protect and compensate the Company in the event of such breach by the -10- Executive, the Company shall be entitled to any and all remedies at law and equitable relief as described in Section 7.3. 6.4 Termination Without Cause or for Good Reason On or After Change of Control. In the event that the Executive has a Termination Without Cause or a Termination for Good Reason on or after a Change of Control, the Executive shall receive the following: (a) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to the sum of Executive's Accrued Base Salary, Accrued Annual Bonus and Prorata Annualized Bonus; (b) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to three times the sum of (i) the Executive's Base Salary and (ii) the Executive's Annualized Bonus; (c) the benefits specified in Sections 5.2 (other than those provided by tax-qualified plans), 5.3 and 5.4 to which Executive is entitled as of the Date of Termination for three years following his Date of Termination on the same basis as if Executive was employed by the Company during such three year period; provided, that if any of the foregoing benefits described in 5.3 cannot be provided by the Company under the applicable benefit plan, the Executive shall receive in lieu of such benefits a cash lump sum payment immediately after the Date of Termination equal to three times the Company's annual contributions and premiums on behalf of the Executive to such plan (determined based upon the year in which the Date of Termination occurs) together with a Tax Gross-Up Payment for any Taxes payable by Executive on such payments; and further provided that any coverage required by COBRA shall begin three years after the Date of Termination (or, if earlier, as of the date on which the Executive's benefit giving rise to COBRA ceases); and (d) immediately after the Date of Termination, a lump-sum amount in immediately available funds of any amount then payable to Executive pursuant to Article VIII. Notwithstanding any provisions of this Section 6.4 to the contrary, if Executive breaches any or all of the provisions of Sections 7.1 and 7.2, the continuation of benefits pursuant to Section 6.4(c) shall cease upon such breach and, to prevent the Executive's unjust enrichment, the Executive shall immediately pay the Company an amount equal to (i) the amount that the Executive received from the Company pursuant to this Section 6.4, multiplied by (ii) a fraction of which the numerator is the number of days remaining from the date of the breach through the first anniversary of the Executive's Termination of Employment and the denominator of which is 365. In addition to the foregoing, and to protect and compensate the Company in the event of such breach by the Executive, the Company shall be entitled to any and all remedies at law and equitable relief as described in Section 7.3. 6.5 Termination for Death or Disability within Seven Months of a Change of Control. In the event that the Executive has a Termination of Employment due to death or Disability within seven months after a Change of Control, the Executive's Beneficiaries shall receive the -11- compensation and benefits described in Section 6.4 except that the continued benefits (or cash in lieu thereof) described in Section 6.4(c) shall be limited to the welfare benefits specified in Section 5.3. 6.6 Imminent Control Change. If an Imminent Control Change Date (as defined below) occurs on or within 30 days after the date on which the Company delivers a Notice of Termination to Executive terminating Executive's employment not for Cause and if a Change of Control occurs within 180 days after delivery of the Notice, the Executive's Termination of Employment pursuant to the Notice, shall be deemed a Termination of Employment Without Cause on or after a Change of Control and the Executive's rights and obligations shall be determined under Section 6.4 rather than Section 6.3. Any payments or benefits to be received by the Executive pursuant to Section 6.4 shall be reduced by any payments or benefits made or provided pursuant to Section 6.3. If an Imminent Control Change Date occurs on or within 30 days after the date on which the Executive has a Termination of Employment due to death or Disability and if a Change of Control occurs within 180 days after death or Disability, the Executive's Termination of Employment due to death or Disability shall be deemed a Termination of Employment due to death or Disability on or after a Change of Control and the Executive's Beneficiaries' rights and obligations shall be determined under Section 6.5 rather than Section 6.2. Any payments or benefits to be received by the Executive's Beneficiaries pursuant to Section 6.5 shall be reduced by any payments or benefits made or provided pursuant to Section 6.2. "Imminent Control Change Date" means any date on which occurs (a) a presentation to the Company's stockholders generally or any of the Company's directors or executive officers of a proposal or offer for a Change of Control, (b) the public announcement (whether by advertisement, press release, press interview, public statement, SEC filing or otherwise) of a proposal or offer for a Change of Control, or (c) such proposal or offer remains effective and unrevoked. 6.7 Other Rights. This Agreement shall not prevent or limit Executive's continuing or future participation in any benefit, bonus, incentive or other plan, program or policy provided by the Company and for which Executive may qualify, nor shall this Agreement limit or otherwise affect such rights as Executive may have under any other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, program or policy and any other payment or benefit required by law at or after the Date of Termination shall be payable in accordance with such plan, program or policy or applicable law except as expressly modified by this Agreement. 6.8 Termination Rights. Executive recognizes and agrees that the Company has the right to terminate his employment for any reason or no reason and that upon such termination the Executive's sole right is to receive compensation and benefits in accordance with the terms of this Agreement. Article VII. COVENANTS 7.1 Non-Disclosure and Non-Solicitation. Executive acknowledges that the successful marketing and development of the Company's products requires substantial time and -12- expense. Such efforts utilize and generate valuable confidential and proprietary information, of which Executive will obtain knowledge during the course of his employment with the Company. As used herein, "Confidential Information" means any information of the Company that the Company considers to be proprietary and treats as confidential or information of any third party that the Company is under an obligation to keep confidential, including but not limited to the following: (i) trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, (ii) employment status, salaries and other personnel information, decisions to offer employment, pre-employment testing and screening results, citizenship status, disability status, performance issues, executive evaluations, medical problems of executives and executives' families, garnishments and levies against wages, contents of employment agreements, statements regarding the financial condition of the Company or any subsidiary or affiliated entity, payments made to or expenses incurred by the Company or any of its executives, shareholders or directors, discounts given by the Company, vendors and other parties, minutes of Board meetings of the Company or any subsidiary or affiliated entities, contents of contracts, legal matters by or against the Company or any subsidiary or affiliated entities, business strategies, plans, proposals, names of customers and potential customers; and (iii) other information or materials of the Company marked or noticed by the Company as being confidential, whether constituting a trade secret or not, and whether proprietary or not, which are of value to the Company. For purposes of this Agreement, Confidential Information includes the foregoing and other information protected under the Illinois Trade Secrets Act. Confidential Information does not include: (i) information that at the time of disclosure is in the public domain through no fault of Executive; (ii) information received from a third party outside of the Company that was disclosed without a breach of any confidentiality obligation; (iii) information approved for public release by written authorization of the Company; or (iv) information that is required by law or an order of any court, agency or proceeding to be disclosed. Executive acknowledges and agrees that the Company shall retain exclusive ownership of all right, title, and interest in the Confidential Information, including any and all worldwide copyrights, trade secrets, patent, and confidential and proprietary information rights. Executive agrees to undertake the following obligations, which Executive acknowledges to be reasonably designed to protect the Company's legitimate business interests without unnecessarily or unreasonably restricting Executive's post-employment opportunities: (a) Executive agrees that he will not at any time, whether during or after the cessation of his employment, reveal or permit any other person or entity to reveal, any of the Confidential Information to any person or any entity, except, and only to the extent, as may be required in the ordinary course of performing Executive's assigned duties as an Executive of the Company, and Executive agrees to keep secret, and take all necessary precautions against disclosure of, all Confidential Information and all matters entrusted to him and not to use or attempt to use any Confidential Information in any manner that may cause injury or loss, or may be calculated to cause injury or loss, whether directly or indirectly, to the Company or its customers; (b) Executive agrees that during and after his employment he shall not remove, copy, duplicate or otherwise reproduce, use or permit to be used any notes, memoranda, reports, lists, records, drawings, sketches, specifications, software programs, data, documentation or other materials of any nature relating to any matter within the -13- scope of the business of the Company or concerning any of its dealings or affairs except as required to perform Executive's duties for the Company; (c) Upon cessation of his employment relationship with the Company, Executive shall immediately deliver to the Company all Confidential Information and other materials relating to the Company in his possession or delivered to him by the Company, including computer programs, files, notes, records, memoranda, reports, lists, drawings, sketches, specifications, data, charts, and other documents, materials and things ("Materials"), whether or not containing Confidential Information, whether or not prepared by Executive, it being agreed that all Materials shall be and remain the sole and exclusive property of the Company; (d) Without limiting the obligations of Section 7.1(c), Executive agrees that while Executive is employed by the Company prior to his Date of Termination and for a period of one year following his Date of Termination he will not, whether alone or as employee, owner, partner, officer, director, consultant, agent, executive, independent contractor, or stockholder of any firm, corporation or other commercial enterprise, directly or indirectly solicit business from: (i) any customer of the Company with which Executive had contact, participated in the contact, or about which Executive had knowledge of Confidential Information by reason of Executive's employment with the Company within the one year period preceding the Date of Termination, or (ii) any current customer prospect of the Company for whom Executive directly or indirectly assisted in the preparation or submission of a proposal made by the Company to such customer prospect during the one year period preceding the Date of Termination, unless the Company acknowledges in writing its intent not to further pursue such customer prospect; provided, further, that Executive shall, however, be permitted to own securities of any public company not in excess of 5% of any class of such securities and to own stock, partnership interests or other securities of any non-public entity not in excess of 5% of any class of such securities, and such ownership shall not be considered to be in competition with the Company; and (e) Except as may be required in the ordinary course of performing his duties as an employee of the Company, while employed prior to his Date of Termination and during the one year period immediately following the Date of Termination, Executive shall not, directly or indirectly, solicit or attempt to solicit any employee of the Company to work for any person, partnership or entity other than the Company, or engage in any activity that would cause any such employee to violate any agreement with the Company, or dissuade, or attempt to dissuade, any such employee from faithfully discharging such employee's contractual and fiduciary obligations to serve the Company's interests with undivided loyalty. 7.2 Non Competition. Without limiting the obligation imposed by Section 7.1, and to more fully protect the Confidential Information, Executive hereby agrees that while he is employed by the Company prior to the Date of Termination and for a period of one year following the Date of Termination, he will not, directly or indirectly, anywhere in the world where the Company conducts business, render services to any Conflicting Organization in any capacity in which the Confidential Information of the Company would reasonably be considered -14- to be useful to the Conflicting Organization; provided, however, that Executive may render services to a Conflicting Organization whose business is diversified (and which has separate and distinct divisions), as long as such services are being rendered to a part of the business that is separate and distinct from the part of the business that renders such person or entity a Conflicting Organization. (a) If, at the time of enforcement of Sections 7.1 and 7.2, a court shall hold that the duration, scope, area or activity restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope, area or activity restrictions reasonable and enforceable under such circumstances shall be substituted for the stated duration, scope, area or activity restrictions. (b) "Conflicting Organization" means for the purposes of this Section, any person or entity which is engaged in or about to become engaged in, research, development, production, manufacturing, importation, marketing, licensing, selling, or servicing of a Conflicting Product. (c) "Conflicting Product" means any product, process, system or service of any person or organization other than the Company or an Affiliate, in existence or under development, which is the same as or similar to or competes with a product, process, system or service upon which Executive works or has worked during the three year period ending on his Date of Termination, or about which Executive acquired or acquires Confidential Information. 7.3 Remedies. Executive recognizes and agrees that a breach of any or all of the provisions of Sections 7.1 and 7.2 will constitute immediate and irreparable harm to the Company for which damages cannot be readily calculated and for which damages are an inadequate remedy. Accordingly, Executive acknowledges that in addition to any and all remedies at law, the Company shall be entitled to specific performance or injunctive or other equitable relief to prevent the breach or threatened breach of Executive's obligations under this Agreement. 7.4 Intellectual Property. During the employment period, Executive shall disclose immediately to the Company all ideas, inventions and business plans that he makes, conceives, discovers or develops during the course of his employment with the Company, including any inventions, modifications, discoveries, developments, improvements, computer programs, processes, products or procedures (whether or not protectable upon application by copyright, patent, trademark, trade secret or other proprietary rights) ("Work Product") that: (i) relate to the business of the Company or any customer or supplier to the Company or any of the products or services being developed, manufactured, sold or otherwise provided by the Company or that may be used in relation therewith; or (ii) result from tasks assigned to Executive by the Company; or (iii) result from the use of the premises or personal property (whether tangible or intangible) owned, leased or contracted for by the Company. Executive agrees that any Work Product shall be the property of the Company and, if subject to copyright, shall be considered a "work made for hire" within the meaning of the Copyright Act of 1976, as amended (the "Act"). If and to the extent that any such Work Product is found as a matter of law not to be a "work made for hire" within the meaning of the Act, Executive expressly assigns to the Company all right, title and -15- interest in and to the Work Product, and all copies thereof, and the copyright, patent, trademark, trade secret and all their proprietary rights in the Work Product, without further consideration, free from any claim, lien for balance due or rights of retention thereto on the part of Executive. (a) To the extent applicable, pursuant to Illinois Executive Patent Act, the Company hereby notifies Executive that the preceding paragraph does not apply to any inventions for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on the Executive's own time, unless: (i) the invention relates (a) to the Company's business, or (b) to the Company's actual or demonstrably anticipated research or development, or (ii) the invention results from any work performed by the Executive for the Company. (b) Executive agrees that upon disclosure of Work Product to the Company, Executive will, during his employment and at any time thereafter, at the request and cost of the Company all such documents and perform all such acts as the Company or its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world, and when so obtained or vested to renew and restore the same; and (ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection. (c) In the event that the Company is unable, after reasonable effort, to secure Executive's signature on any letters patent, copyright or other analogous protection relating to Work Product, whether because of Executive's physical or mental incapacity or for any other reason whatsoever, Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney-in-fact, to act for and on his behalf to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright and other analogous protection with the same legal force and effect as if personally executed by Executive. Article VIII. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY 8.1 Tax Gross-Up Payment. If at any time or from time to time it shall be determined that any payment to Executive pursuant to this Agreement or any other payment or benefit from the Company, any Affiliate, any shareholder of the Company or any other person would be subject to the excise tax imposed by Section 4999 of the Code or any similar tax payable under any United States federal, state, local, foreign or other law, then Executive shall receive and the Company shall pay or cause to be paid a Tax Gross-Up Payment with respect to all such excise taxes and other Taxes. The Tax Gross-Up Payment is intended to compensate Executive for all such excise taxes and any federal, state, local, foreign or other income, employment, or excise taxes or other taxes payable by Executive with respect to the Tax Gross-Up Payment. -16- Article IX. MISCELLANEOUS 9.1 Approvals. The Company represents and warrants to Executive it has taken all corporate action necessary to authorize this Agreement. 9.2 Full Settlement. The exclusive method for the Company to terminate its obligations to provide compensation or benefits to Executive pursuant to Articles IV and V of this Agreement is to terminate Executive's employment in compliance with all applicable requirements of Sections 6.1, 6.2, 6.3, 6.4 or 6.5 of this Agreement, as applicable, and to make the payments and provide the benefits specified in such applicable Section. 9.3 No Mitigation. In no event shall Executive be obligated to seek other employment or take any other action to mitigate the amounts payable to Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned as a result of Executive's employment by another employer, except that any continued welfare benefits provided for by Section 6.3(f) or Section 6.4(c) shall not duplicate any benefits that are provided to Executive and his family by such other employer and shall be secondary to any coverage provided by such other employer. 9.4 Enforcement. (a) If Executive incurs legal, accounting, expert witness or other fees, costs or expenses in an effort to establish entitlement to, or obtain compensation or benefits or Tax Gross-Up Payment under this Agreement, the Company shall reimburse Executive for such fees and expenses if the Executive prevails (after exhaustion of all available judicial remedies) and provide the Executive with a Tax Gross-Up Payment for any Taxes payable by Executive on such reimbursements. (b) If the Company fails to pay any amount provided under this Agreement when due, the Company shall pay interest on such amount at an annual rate equal to the lesser of (i) (A) the highest rate of interest charged by the Company's principal lender on its revolving credit agreements plus 200 basis points, or (B) in the absence of such a lender, 200 basis points over the prime commercial lending rate announced by The Wall Street Journal in effect from time to time during the period of such nonpayment, or (ii) the highest legally-permissible interest rate allowed to be charged under applicable law. 9.5 Release. Notwithstanding any provisions of this Agreement to the contrary, the Company's obligations to make payments and to provide benefits under Sections 6.3, 6.4 and 6.5, other than the obligation to pay Accrued Base Salary and Accrued Annual Bonus, are expressly conditioned upon the Executive's execution of a mutual release and waiver substantially in the form attached hereto as Exhibit A and the expiration of the Revocation Period as defined in the release. 9.6 Beneficiary. If Executive dies prior to receiving all of the amounts payable to him in accordance with the terms and conditions of this Agreement, such amounts shall be paid -17- to the beneficiary ("Beneficiary") designated by Executive in writing to the Company during his lifetime, or if no such Beneficiary is designated, to Executive's estate. Such payments shall be made in a lump sum to the extent so payable and, to the extent not payable in a lump sum, in accordance with the terms of this Agreement. Such payments shall not be less than the amount payable to Executive as if Executive had lived to the date of payment and were the payee. Executive, without the consent of any prior Beneficiary, may change his designation of Beneficiary or Beneficiaries at any time or from time to time by submitting to the Company a new designation in writing. 9.7 Assignment; Successors. The Company may not assign its respective rights and obligations under this Agreement without the prior written consent of Executive except to a successor of the Company's business. This Agreement shall be binding upon and inure to the benefit of Executive, his estate and Beneficiaries, the Company and the successors and permitted assigns of the Company. 9.8 Non-alienation. Except as is otherwise expressly provided herein, benefits payable under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by Executive, and any such attempt to dispose of any right to benefits payable hereunder shall be void. 9.9 Severability. If all or any part of this Agreement is declared to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of this Agreement not declared to be unlawful or invalid. Any provision so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such provision to the fullest extent possible while remaining lawful and valid. 9.10 Amendment; Waiver. This Agreement shall not be amended or modified except by written instrument executed by the Company and Executive. A waiver of any term, covenant or condition contained in this Agreement shall not be deemed a waiver of any other term, covenant or condition, and any waiver of any default in any such term, covenant or condition shall not be deemed a waiver of any later default thereof or of any other term, covenant or condition. 9.11 Notices. All notices hereunder shall be in writing and delivered by hand, by nationally-recognized delivery service that guarantees overnight delivery, or by first-class, registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Company, to: Chief Executive Officer Amcol International Corporation One North Arlington 1500 West Shore Drive Arlington Heights, IL 60004-7803 If to Executive, to: (at his most recent home address or facsimile number on file with the Company) -18- Either party may from time to time designate a new address by notice given in accordance with this Section. Notice shall be effective when actually received by the addressee. 9.12 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument. 9.13 Captions. The captions of this Agreement are not a part of the provisions hereof and shall have no force or effect. 9.14 Entire Agreement. This Agreement forms the entire agreement between the parties hereto with respect to the subject matter contained in the Agreement and shall supersede all prior agreements, promises and representations regarding employment, compensation, severance or other payments contingent upon termination of employment, whether in writing or otherwise, including but not limited to that certain change of control agreement dated May 17, 2001h by and between the Company and the Executive. 9.15 Applicable Law. This Agreement shall be interpreted and construed in accordance with the laws of the State of Illinois, without regard to its choice of law principles. 9.16 Survival of Executive's Rights. All of Executive's rights hereunder, including his rights to compensation and benefits, and his obligations under Article VI and Article VII hereof, shall survive the termination of Executive's employment or the termination of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. AMCOL INTERNATIONAL CORPORATION By: ------------------------------------- Its: Chief Executive Officer ------------------------------------ EXECUTIVE ----------------------------------------- Gary L. Castagna -19- EX-10.29 6 dex1029.txt EMPLOYMENT AGMT. DATED 3/15/02 - MCKENDRICK EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (the "Agreement") dated as of March 15, 2002 ("Agreement Date") by and between Amcol International Corporation, a Delaware corporation (the "Company"), and Ryan F. McKendrick ("Executive"), a resident of Illinois. In consideration of the mutual agreements contained herein, the Company and Executive agree as follows: Article I. DEFINITIONS The terms set forth below have the following meanings (such meanings to be applicable to both the singular and plural forms, except where otherwise expressly indicated): 1.1 "Accrued Annual Bonus" means the amount of any Annual Bonus earned but not yet paid with respect to any Fiscal Year ended prior to the Date of Termination. 1.2 "Accrued Base Salary" means the amount of Executive's Base Salary which is accrued but not yet paid as of the Date of Termination. 1.3 "Affiliate" means any Person that directly or indirectly controls, is controlled by, or is under common control with, the applicable Person. For the purposes of this definition, the term "control" when used with respect to any Person means the power to direct or cause the direction of management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. 1.4 "Agreement" - see the introductory paragraph of this Agreement. 1.5 "Agreement Date" -- see the introductory paragraph of this Agreement. 1.6 "Anniversary Date" means any annual anniversary of the Agreement Date. 1.7 "Annual Bonus" - see Section 4.2. 1.8 "Annualized Bonus" means, as of any date, the greatest of the following amounts that is determinable and applicable: (i) the Target Annual Bonus for the Fiscal Year during which the Date of Termination occurs; and (ii) the average of the Annual Bonuses paid or payable to Executive in respect of the three most recent Fiscal Years ended on or before such date; provided that, in subsection (ii) above, annual bonuses paid in respect of Executive prior to the Agreement Date shall be included in such computation if, as of such date, three years have not elapsed since the Agreement Date; and further provided that if the Executive has not been employed by the Company for three full Fiscal Years ended on or before the Date of Termination, any bonus payable in respect of a partial Fiscal Year shall be annualized and the average of the annual bonuses shall be determined based upon such annualized bonus and the bonuses paid or payable to the Executive in respect of any other full Fiscal Years. 1.9 "Base Salary" -- see Section 4.1. 1.10 "Beneficial Owner" means such term as defined in Rule 13d-3 (or any successor rule) of the SEC under the Exchange Act. 1.11 "Beneficiary" - see Section 9.6. 1.12 "Board" means the Board of Directors of the Company. 1.13 "Cause" means any of the following: (a) Executive's commission of a felony or misdemeanor that involves fraud, dishonesty or moral turpitude, (b) Executive's willful or intentional material breach of this Agreement, or (c) willful or intentional material misconduct by Executive in the performance of his duties under this Agreement. For purposes of clauses (b) and (c) of the preceding sentence, Cause shall not include bad judgment or negligence which results from the Executive's good faith efforts to perform his duties. 1.14 "Change of Control" means any one or more of the following: (a) any person (as such term is used in Rule 13d-5 under the Exchange Act) or group (as such term is defined in Section 3(a)(9) and 13(d)(3) of the Exchange Act), other than a Subsidiary, any employee benefit plan (or any related trust) of the Company or any of its Subsidiaries or any Excluded Person, becomes the Beneficial Owner of 50.1% or more of the common stock of the Company or of Voting Securities representing 50.1% or more of the combined voting power of the Company (such a person or group, a "50.1% Owner"), except that (i) no Change of Control shall be deemed to have occurred solely by reason of such beneficial ownership by a corporation with respect to which both more than 49.9% of the common stock of such corporation and Voting Securities representing more than 49.9% of the aggregate voting power of such corporation are then owned, directly or indirectly, by the persons who were the direct or indirect owners of the common stock and Voting Securities of the Company immediately before such acquisition in substantially the same proportions as their ownership, immediately before such acquisition, of the common stock and Voting Securities of the Company, as the case may be and (ii) such corporation shall not be deemed a 50.1% Owner; or (b) the Incumbent Directors (determined using the Agreement Date as the baseline date) cease for any reason to constitute at least one-half of the directors of the Company then serving; or -2- (c) immediately prior to the consummation by the Company of a merger, reorganization, consolidation, or similar transaction, or a plan or agreement for the sale or other disposition of all, or substantially all of, the consolidated assets of the Company or a plan of liquidation of the Company (any of the foregoing transactions, a "Reorganization Transaction") which is not an Exempt Reorganization Transaction (provided however, there shall be no Change of Control unless the Reorganization Transaction is actually consummated); or (d) the approval by the stockholders of the Company of a plan of liquidation of the Company which, based on information included in the proxy and other written materials distributed to the Company's stockholders in connection with the solicitation by the Company of such stockholder approval, is not expected to qualify as an Exempt Reorganization Transaction; or (e) if the Executive's primary responsibility is being the President of a Subsidiary, the sale by the Company of all of its stock in the Subsidiary or the sale or other disposition of all of the assets of the Subsidiary. Notwithstanding the occurrence of any of the foregoing events, a Change of Control shall not occur with respect to a Executive if, in advance of such event, the Executive agrees in writing that such event shall not constitute a Change of Control. 1.15 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.16 "Company" -- see the introductory paragraph to this Agreement. 1.17 "Date of Termination" means the date of the receipt of the Notice of Termination by Executive (if such Notice is given by the Company) or by the Company (if such Notice is given by Executive), or any later date, not more than 15 days after the giving of such Notice, specified in such notice; provided, however, that: (i) if Executive's employment is terminated by reason of death, the Date of Termination shall be the date of Executive's death; and (ii) if Executive's employment is terminated by reason of Disability, the Date of Termination shall be the 30th day after Executive's receipt of the physician's certification of Disability, unless, before such date, Executive shall have resumed the full-time performance of Executive's duties; and (iii) if Executive terminates his employment without Good Reason or if the Company terminates Executive's employment without Cause, the Date of Termination shall be the 90th day after the giving of such Notice; and (iv) if no Notice of Termination is given, the Date of Termination shall be the last date on which Executive is employed by the Company. 1.18 "Disability" means a mental or physical condition which renders Executive unable or incompetent to carry out the material job responsibilities which such Executive held or -3- the material duties to which Executive was assigned at the time the disability was incurred, which has existed for at least six months and which in the certified opinion of a physician mutually agreed upon by the Company and Executive (which agreement neither party shall unreasonably withhold) is expected to be permanent or to last for an indefinite duration or a duration in excess of six months. 1.19 "Employment Period" - see Section 3.1. 1.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.21 "Excluded Person" means any of the Paul Bechtner Trust, Everett P. Weaver, William D. Weaver or any Named Executive, any Affiliates or Family Member of any of the foregoing and any group (as such term is defined in Section 3(a)(9) and 13(d)(3) of the Exchange Act) of which any of the foregoing is a member. 1.22 "Executive" - see the introductory paragraph of this Agreement. 1.23 "Exempt Reorganization Transaction" means a Reorganization Transaction which results in (i) the Persons who were the direct or indirect owners of the outstanding common stock and Voting Securities of the Company immediately before such Reorganization Transaction becoming, immediately after the consummation of such Reorganization Transaction, the direct or indirect owners of both more than 49.9% of the then-outstanding common stock of the Surviving Corporation and Voting Securities representing more than 49.9% of the aggregate voting power of the Surviving Corporation, in substantially the same respective proportions as such Persons' ownership of the common stock and Voting Securities of the Company immediately before such Reorganization Transaction; or (ii) the Excluded Person owning 50% or more of the common stock of the Surviving Corporation or Voting Securities representing 50% or more of the combined voting power of the Surviving Corporation. 1.24 "Family Member" means, with respect to the applicable Person, a spouse, ancestor, lineal descendant, or spouse of a lineal descendant, including without limitation descendants by adoption. 1.25 "Fiscal Year" means the fiscal year used in connection with the preparation of the consolidated financial statements of the Company. 1.26 "Good Reason" means the occurrence of any one of the following events unless Executive specifically agrees in writing that such event shall not be Good Reason: (a) any material breach of the Agreement by the Company, provided, however, that no breach of this Agreement shall constitute Good Reason unless Executive gives the Company 30 days' prior written notice of such breach and the Company fails to cure such breach within the 30-day period; (b) the failure of either the Company to assign this Agreement to a successor of the Company or failure of a successor of the Company to expressly assume and agree to be bound by the Agreement; or -4- (c) a Termination of Employment by Executive for any reason or no reason during the 30-day period commencing six months after a Change of Control. In the event of the occurrence or omission constituting Good Reason other than an event described in subsection (c) above, Executive may within 90 days after such event occurs notify the Company of the events constituting such Good Reason by a Notice of Termination. In the event of the occurrence constituting Good Reason in subsection (c) above, Executive may within the 30 day period commencing six months after a Change of Control notify the Company of the events constituting such Good Reason by a Notice of Termination. 1.27 "including" means including without limitation. 1.28 "Incumbent Directors" means, as of any specified baseline date, individuals then serving as members of the Board who were members of the Board as of the date immediately preceding such baseline date; provided that any subsequently-appointed or elected member of the Board whose election, or nomination for election by stockholders of the Company or the Surviving Corporation, as applicable, was approved by a vote or written consent of at least one-half of the directors then comprising the Incumbent Directors shall also thereafter be considered an Incumbent Director, unless the initial assumption of office of such subsequently-elected or appointed director was in connection with (i) an actual or threatened election contest, including a consent solicitation, relating to the election or removal of one or more members of the Board, (ii) a "tender offer" (as such term is used in Section 14(d) of the Exchange Act), (iii) a proposed Reorganization Transaction, or (iv) a request, nomination or suggestion of any Beneficial Owner of Voting Securities representing 35% or more of the aggregate voting power of the Voting Securities of the Company or the Surviving Corporation, as applicable. 1.29 "Named Executive" means any individual listed on Exhibit A except to the extent the individual had a termination of employment not less than 120 days prior to the applicable event potentially constituting a Change of Control and any other employee or officer of the Company designated by the Board and who is a party to an agreement substantially in the same form as this Agreement (with variation in the amount of compensation and benefits payable under the agreement) and entered into by the employee or officer not less than 120 days prior to the applicable event potentially constituting a Change of Control. 1.30 "Notice of Termination" means a written notice given in accordance with Section 9.11 which sets forth (a) the specific termination provision in this Agreement relied upon by the party giving such notice, (b) in reasonable detail the specific facts and circumstances claimed to provide a basis for such Termination of Employment, and (c) if the Date of Termination is other than the date of receipt of such Notice of Termination, the Date of Termination. 1.31 "Person" means any individual, sole proprietorship, partnership, joint venture, limited liability company, trust, unincorporated organization, corporation, institution, public benefit corporation, entity or government instrumentality, division, agency, body or department. -5- 1.32 "Prorata Annual Bonus" means the product of (i) the Annual Bonus that Executive would have earned for the Fiscal Year during which the Executive's Date of Termination occurs based upon the Company's achievement of the Target Annual Goals during such Fiscal Year, multiplied by (ii) a fraction of which the numerator is the number of days which have elapsed in such Fiscal Year through the Date of Termination and the denominator of which is 365. 1.33 "Prorata Annualized Bonus" means the product of (i) the Executive's Annualized Bonus, multiplied by (ii) a fraction of which the numerator is the number of days which have elapsed in such Fiscal Year through the Date of Termination and the denominator of which is 365. 1.34 "Reorganization Transaction" -- see the definition of "Change of Control." 1.35 "Subsidiary" means, with respect to any Person, (a) any corporation of which more than 50% of the Voting Securities are at the time, directly or indirectly, owned by such Person, and (b) any partnership or limited liability company in which such Person has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%. 1.36 "Surviving Corporation" means the corporation resulting from a Reorganization Transaction or, if securities representing more than 50% of the aggregate Voting Power of such resulting corporation are directly or indirectly owned by another corporation, such other corporation. 1.37 "Target Annual Bonus" -- see Section 4.2. 1.38 "Target Annual Goals" -- see Section 4.2. 1.39 "Tax Gross-Up Payment" means an amount payable to Executive such that after payment of Taxes on such amount there remains a balance sufficient to pay the Taxes being reimbursed. 1.40 "Taxes" means the incremental federal, state, local and foreign income, employment, excise and other taxes payable by Executive with respect to any applicable item of income. 1.41 "Termination For Good Reason" means a Termination of Employment by Executive for a Good Reason. 1.42 "Termination of Employment" means a termination by the Company or Executive of Executive's employment. 1.43 "Termination Without Cause" means a Termination of Employment by the Company for any reason other than Cause or Executive's death or Disability. 1.44 "Transitional Services Period" - see Section 6.3. -6- 1.45 "Voting Securities" of a corporation means securities of such corporation that are entitled to vote generally in the election of directors of such corporation, but not including any other class of securities of such corporation that may have voting power by reason of the occurrence of a contingency. Article II. DUTIES 2.1 Duties. During the Employment Period, the Company shall employ Executive as President of Colloid Environmental Technologies Company, and in connection therewith, the Executive shall perform such duties and responsibilities as may be assigned to him from time to time by, or under the authority of, the Board, the Chief Executive Officer of the Company or any of their designees, and in the absence of such assignment, such duties customary to such office as is necessary to the operations of the Company. Executive shall devote all of his business time, attention and effort during normal business hours, excluding any periods of disability, vacation, or sick leave to which Executive is entitled, to the affairs of the Company and shall use his best efforts to promote the interests of the Company. 2.2 Other Activities. Executive may serve on civic or charitable boards or committees, deliver lectures, fulfill speaking engagements or teach at educational institutions, and manage personal investments; provided that such activities do not significantly interfere with the performance of Executive's duties under this Agreement. Executive may serve on corporate board or committees with the prior written consent of the Board. Article III. EMPLOYMENT PERIOD 3.1 Employment Period. Subject to the termination provisions hereinafter provided, the term of Executive's employment under this Agreement (the "Employment Period") shall begin on the Agreement Date and end on the Anniversary Date which is three years after such date or, if later, such later date to which the Employment Period is extended pursuant to the following sentence. On the date which is two and one-half years after the Agreement Date and thereafter, the Employment Period (assuming that an Expiration Notice to the effect that the Agreement shall expire on the Anniversary Date which is three years after the Agreement Date has not been delivered by the Executive or Company to the other prior to the date which is two and one-half years after the Agreement Date) shall be automatically extended each day by one day to create a new six month term until, at any time after the date which is two and one-half years after the Agreement Date the Company delivers written notice (an "Expiration Notice") to Executive or Executive delivers an Expiration Notice to the Company, in either case, to the effect that the Agreement shall expire on a date specified in the Expiration Notice (the "Expiration Date") that is not less than 6 months after the date the Expiration Notice is delivered to the Company or the Executive, respectively. The Employment Period shall end prior to the end of the Employment Period as described above upon the Executive's Date of Termination even if the Executive continues to provide the services described in Section 6.3(e). The -7- employment of Executive by the Company shall not be terminated other than in accordance with Article VI. Article IV. COMPENSATION 4.1 Salary. During the Employment Period, the Company shall pay or cause to be paid to Executive in accordance with its normal payroll practices (but not less frequently than monthly) an annual salary at a rate of $ 218,000 per year ("Base Salary"). During the Employment Period, the Base Salary shall be reviewed at least annually and may be increased from time to time as shall be determined by the Company. After any such increase, the term "Base Salary" shall thereafter refer to the increased amount. Any increase in Base Salary shall not limit or reduce any other obligation of the Company to Executive under this Agreement. Base Salary shall not be reduced at any time without the express written consent of Executive. 4.2 Annual Bonus. (a) The Company shall pay or cause to be paid to Executive an annual cash bonus ("Annual Bonus") in accordance with the terms hereof for each Fiscal Year which begins or ends during the Employment Period. Executive shall be eligible for an Annual Bonus based upon target performance goals (the "Target Annual Goals"), as determined by the Compensation Committee of the Board on an annual basis, which provides for a payment of at least 60.0% of Executive's Base Salary ("Target Annual Bonus") upon the Executive's achievement of the Target Annual Goals. The Target Annual Goals shall be set as described above no later than February 28 of each Fiscal Year except that in the case of the 2001 Fiscal Year if the Target Annual Goals have not been set prior to the Agreement Date, the Target Annual Goals shall be set within the first 60 days after the Agreement Date. (b) The Company shall pay or cause to be paid the entire Annual Bonus that is payable with respect to a Fiscal Year in cash as soon as practicable after the Company can determine whether and the degree to which Target Annual Goals have been achieved following the close of such Fiscal Year. Any such Annual Bonus shall in any event be paid within 90 days after the end of the Fiscal Year. Article V. OTHER BENEFITS 5.1 Stock Option, Restricted Stock and Other Equity Incentive Plans. In addition to Base Salary and an Annual Bonus, Executive shall be eligible to participate during the Employment Period in all stock option, restricted stock and other equity incentive plans, practices, policies and programs of the Company, in accordance with their terms as in effect from time to time. If a Change of Control occurs during the Employment Period (or, if applicable, the Transitional Services Period), all outstanding stock options, restricted stock and -8- other equity compensation granted to Executive (whether before, on or after the Agreement Date) shall become fully vested and exercisable. 5.2 Incentive, Savings and Retirement Plans. In addition to Base Salary and Annual Bonus, Executive shall be entitled to participate during the Employment Period in all incentives (other than those provided for in Section 5.1), savings and retirement plans, practices, policies and programs that are from time to time applicable to any other comparable senior executive of the Company including any supplemental executive retirement plan, in accordance with their terms as in effect from time to time. 5.3 Welfare Benefits. During the Employment Period, Executive and his family shall be eligible to participate in, and shall receive all benefits under, welfare benefit plans, practices, policies and programs provided by the Company (including medical, prescription, dental, disability, salary continuance, employee life, group life, dependent life, accidental death and travel accident insurance plans and programs) applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time. 5.4 Fringe Benefits. During the Employment Period, Executive shall be entitled to fringe benefits applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time. 5.5 Vacation. During the Employment Period, Executive shall be entitled to paid vacation time in accordance with the plans, practices, policies, and programs applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time, but in no event shall such vacation time be less than four weeks per calendar year. 5.6 Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable employment-related expenses incurred by Executive upon the receipt by the Company of an accounting in accordance with practices, policies, and procedures applicable to any comparable senior executive of the Company, in accordance with their terms as in effect from time to time. Article VI. TERMINATION BENEFITS 6.1 Termination for Cause or Other than for Good Reason, etc. If the Company terminates Executive's employment for Cause or Executive terminates his employment other than for Good Reason, death or Disability, the Company shall pay to Executive immediately after the Date of Termination an amount equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus and Executive shall not be entitled to receive any severance payment. 6.2 Termination for Death or Disability Prior to Change of Control or More than Seven Months after a Change of Control. If Executive's employment terminates due to his death or Disability prior to a Change of Control or more than seven months after a Change of Control, the Company shall pay to Executive or his Beneficiaries, as the case may be, (i) immediately -9- after the Date of Termination an amount which is equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus, and (ii) at the time described in Section 4.2(b), an amount which is equal to the Executive's Prorata Annual Bonus. 6.3 Termination Without Cause or for Good Reason Prior to Change of Control. In the event of a Termination Without Cause or a Termination for Good Reason prior to a Change of Control, Executive shall receive the following: (a) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus; (b) at the time described in Section 4.2(b), an amount which is equal to the Executive's Prorata Annual Bonus; (c) Base Salary payable on the same basis as in effect immediately prior to the Date of Termination for eighteen months following the Executive's Date of Termination; (d) immediately after the Date of Termination, a lump-sum amount in immediately available funds of any amount then payable to Executive pursuant to Article VIII; (e) during the period (the "Transitional Services Period") beginning on the Executive's Date of Termination and ending on the earliest of (i) eighteen months after the Executive's Date of Termination (ii) the date on which the Executive accepts a position with another employer, (iii) the date on which Executive breaches any of the provisions of Sections 7.1 and 7.2, and (iv) the date on which the Executive terminates his employment with the Company, the Executive shall remain an employee of the Company and shall only perform such transitional assignments for the Company as may be assigned to him from time to time by the Chief Executive Officer; (f) the benefits specified in Sections 5.2 (other than those provided by tax-qualified plans), 5.3 and 5.4 to which Executive is entitled as of the Date of Termination during the Transitional Services Period; provided that any coverage required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, ("COBRA") shall begin after the end of the Transitional Services Period; and (g) for purposes of the Company's stock option plans, restricted stock plans and other equity compensation plans, the Executive shall be considered an employee of the Company for all purposes under such plans through the end of the Transitional Services Period except Executive shall not be eligible for new grants under such plans. Notwithstanding any provisions of this Section 6.3 to the contrary, if Executive breaches any or all of the provisions of Sections 7.1 and 7.2, the payment of the Prorata Annual Bonus pursuant to Section 6.3(b) and the continuation of Base Salary and benefits pursuant to Sections 6.3(c), 6.3(f) (other than COBRA), and 6.3(g) shall cease upon such breach. In addition to the foregoing, and to protect and compensate the Company in the event of such breach by the -10- Executive, the Company shall be entitled to any and all remedies at law and equitable relief as described in Section 7.3. 6.4 Termination Without Cause or for Good Reason On or After Change of Control. In the event that the Executive has a Termination Without Cause or a Termination for Good Reason on or after a Change of Control, the Executive shall receive the following: (a) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to the sum of Executive's Accrued Base Salary, Accrued Annual Bonus and Prorata Annualized Bonus; (b) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to two times the sum of (i) the Executive's Base Salary and (ii) the Executive's Annualized Bonus; (c) the benefits specified in Sections 5.2 (other than those provided by tax-qualified plans), 5.3 and 5.4 to which Executive is entitled as of the Date of Termination for two years following his Date of Termination on the same basis as if Executive was employed by the Company during such two year period; provided, that if any of the foregoing benefits described in 5.3 cannot be provided by the Company under the applicable benefit plan, the Executive shall receive in lieu of such benefits a cash lump sum payment immediately after the Date of Termination equal to two times the Company's annual contributions and premiums on behalf of the Executive to such plan (determined based upon the year in which the Date of Termination occurs) together with a Tax Gross-Up Payment for any Taxes payable by Executive on such payments; and further provided that any coverage required by COBRA shall begin two years after the Date of Termination (or, if earlier, as of the date on which the Executive's benefit giving rise to COBRA ceases); and (d) immediately after the Date of Termination, a lump-sum amount in immediately available funds of any amount then payable to Executive pursuant to Article VIII. Notwithstanding any provisions of this Section 6.4 to the contrary, if Executive breaches any or all of the provisions of Sections 7.1 and 7.2, the continuation of benefits pursuant to Section 6.4(c) shall cease upon such breach and, to prevent the Executive's unjust enrichment, the Executive shall immediately pay the Company an amount equal to (i) the amount that the Executive received from the Company pursuant to this Section 6.4, multiplied by (ii) a fraction of which the numerator is the number of days remaining from the date of the breach through the first anniversary of the Executive's Termination of Employment and the denominator of which is 365. In addition to the foregoing, and to protect and compensate the Company in the event of such breach by the Executive, the Company shall be entitled to any and all remedies at law and equitable relief as described in Section 7.3. 6.5 Termination for Death or Disability within Seven Months of a Change of Control. In the event that the Executive has a Termination of Employment due to death or Disability within seven months after a Change of Control, the Executive's Beneficiaries shall receive the -11- compensation and benefits described in Section 6.4 except that the continued benefits (or cash in lieu thereof) described in Section 6.4(c) shall be limited to the welfare benefits specified in Section 5.3. 6.6 Imminent Control Change. If an Imminent Control Change Date (as defined below) occurs on or within 30 days after the date on which the Company delivers a Notice of Termination to Executive terminating Executive's employment not for Cause and if a Change of Control occurs within 180 days after delivery of the Notice, the Executive's Termination of Employment pursuant to the Notice, shall be deemed a Termination of Employment Without Cause on or after a Change of Control and the Executive's rights and obligations shall be determined under Section 6.4 rather than Section 6.3. Any payments or benefits to be received by the Executive pursuant to Section 6.4 shall be reduced by any payments or benefits made or provided pursuant to Section 6.3. If an Imminent Control Change Date occurs on or within 30 days after the date on which the Executive has a Termination of Employment due to death or Disability and if a Change of Control occurs within 180 days after death or Disability, the Executive's Termination of Employment due to death or Disability shall be deemed a Termination of Employment due to death or Disability on or after a Change of Control and the Executive's Beneficiaries' rights and obligations shall be determined under Section 6.5 rather than Section 6.2. Any payments or benefits to be received by the Executive's Beneficiaries pursuant to Section 6.5 shall be reduced by any payments or benefits made or provided pursuant to Section 6.2. "Imminent Control Change Date" means any date on which occurs (a) a presentation to the Company's stockholders generally or any of the Company's directors or executive officers of a proposal or offer for a Change of Control, (b) the public announcement (whether by advertisement, press release, press interview, public statement, SEC filing or otherwise) of a proposal or offer for a Change of Control, or (c) such proposal or offer remains effective and unrevoked. 6.7 Other Rights. This Agreement shall not prevent or limit Executive's continuing or future participation in any benefit, bonus, incentive or other plan, program or policy provided by the Company and for which Executive may qualify, nor shall this Agreement limit or otherwise affect such rights as Executive may have under any other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, program or policy and any other payment or benefit required by law at or after the Date of Termination shall be payable in accordance with such plan, program or policy or applicable law except as expressly modified by this Agreement. 6.8 Termination Rights. Executive recognizes and agrees that the Company has the right to terminate his employment for any reason or no reason and that upon such termination the Executive's sole right is to receive compensation and benefits in accordance with the terms of this Agreement. Article VII. COVENANTS 7.1 Non-Disclosure and Non-Solicitation. Executive acknowledges that the successful marketing and development of the Company's products requires substantial time and -12- expense. Such efforts utilize and generate valuable confidential and proprietary information, of which Executive will obtain knowledge during the course of his employment with the Company. As used herein, "Confidential Information" means any information of the Company that the Company considers to be proprietary and treats as confidential or information of any third party that the Company is under an obligation to keep confidential, including but not limited to the following: (i) trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, (ii) employment status, salaries and other personnel information, decisions to offer employment, pre-employment testing and screening results, citizenship status, disability status, performance issues, executive evaluations, medical problems of executives and executives' families, garnishments and levies against wages, contents of employment agreements, statements regarding the financial condition of the Company or any subsidiary or affiliated entity, payments made to or expenses incurred by the Company or any of its executives, shareholders or directors, discounts given by the Company, vendors and other parties, minutes of Board meetings of the Company or any subsidiary or affiliated entities, contents of contracts, legal matters by or against the Company or any subsidiary or affiliated entities, business strategies, plans, proposals, names of customers and potential customers; and (iii) other information or materials of the Company marked or noticed by the Company as being confidential, whether constituting a trade secret or not, and whether proprietary or not, which are of value to the Company. For purposes of this Agreement, Confidential Information includes the foregoing and other information protected under the Illinois Trade Secrets Act. Confidential Information does not include: (i) information that at the time of disclosure is in the public domain through no fault of Executive; (ii) information received from a third party outside of the Company that was disclosed without a breach of any confidentiality obligation; (iii) information approved for public release by written authorization of the Company; or (iv) information that is required by law or an order of any court, agency or proceeding to be disclosed. Executive acknowledges and agrees that the Company shall retain exclusive ownership of all right, title, and interest in the Confidential Information, including any and all worldwide copyrights, trade secrets, patent, and confidential and proprietary information rights. Executive agrees to undertake the following obligations, which Executive acknowledges to be reasonably designed to protect the Company's legitimate business interests without unnecessarily or unreasonably restricting Executive's post-employment opportunities: (a) Executive agrees that he will not at any time, whether during or after the cessation of his employment, reveal or permit any other person or entity to reveal, any of the Confidential Information to any person or any entity, except, and only to the extent, as may be required in the ordinary course of performing Executive's assigned duties as an Executive of the Company, and Executive agrees to keep secret, and take all necessary precautions against disclosure of, all Confidential Information and all matters entrusted to him and not to use or attempt to use any Confidential Information in any manner that may cause injury or loss, or may be calculated to cause injury or loss, whether directly or indirectly, to the Company or its customers; (b) Executive agrees that during and after his employment he shall not remove, copy, duplicate or otherwise reproduce, use or permit to be used any notes, memoranda, reports, lists, records, drawings, sketches, specifications, software programs, data, documentation or other materials of any nature relating to any matter within the -13- scope of the business of the Company or concerning any of its dealings or affairs except as required to perform Executive's duties for the Company; (c) Upon cessation of his employment relationship with the Company, Executive shall immediately deliver to the Company all Confidential Information and other materials relating to the Company in his possession or delivered to him by the Company, including computer programs, files, notes, records, memoranda, reports, lists, drawings, sketches, specifications, data, charts, and other documents, materials and things ("Materials"), whether or not containing Confidential Information, whether or not prepared by Executive, it being agreed that all Materials shall be and remain the sole and exclusive property of the Company; (d) Without limiting the obligations of Section 7.1(c), Executive agrees that while Executive is employed by the Company prior to his Date of Termination and for a period of one year following his Date of Termination he will not, whether alone or as employee, owner, partner, officer, director, consultant, agent, executive, independent contractor, or stockholder of any firm, corporation or other commercial enterprise, directly or indirectly solicit business from: (i) any customer of the Company with which Executive had contact, participated in the contact, or about which Executive had knowledge of Confidential Information by reason of Executive's employment with the Company within the one year period preceding the Date of Termination, or (ii) any current customer prospect of the Company for whom Executive directly or indirectly assisted in the preparation or submission of a proposal made by the Company to such customer prospect during the one year period preceding the Date of Termination, unless the Company acknowledges in writing its intent not to further pursue such customer prospect; provided, further, that Executive shall, however, be permitted to own securities of any public company not in excess of 5% of any class of such securities and to own stock, partnership interests or other securities of any non-public entity not in excess of 5% of any class of such securities, and such ownership shall not be considered to be in competition with the Company; and (e) Except as may be required in the ordinary course of performing his duties as an employee of the Company, while employed prior to his Date of Termination and during the one year period immediately following the Date of Termination, Executive shall not, directly or indirectly, solicit or attempt to solicit any employee of the Company to work for any person, partnership or entity other than the Company, or engage in any activity that would cause any such employee to violate any agreement with the Company, or dissuade, or attempt to dissuade, any such employee from faithfully discharging such employee's contractual and fiduciary obligations to serve the Company's interests with undivided loyalty. 7.2 Non Competition. Without limiting the obligation imposed by Section 7.1, and to more fully protect the Confidential Information, Executive hereby agrees that while he is employed by the Company prior to the Date of Termination and for a period of one year following the Date of Termination, he will not, directly or indirectly, anywhere in the world where the Company conducts business, render services to any Conflicting Organization in any capacity in which the Confidential Information of the Company would reasonably be considered -14- to be useful to the Conflicting Organization; provided, however, that Executive may render services to a Conflicting Organization whose business is diversified (and which has separate and distinct divisions), as long as such services are being rendered to a part of the business that is separate and distinct from the part of the business that renders such person or entity a Conflicting Organization. (a) If, at the time of enforcement of Sections 7.1 and 7.2, a court shall hold that the duration, scope, area or activity restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope, area or activity restrictions reasonable and enforceable under such circumstances shall be substituted for the stated duration, scope, area or activity restrictions. (b) "Conflicting Organization" means for the purposes of this Section, any person or entity which is engaged in or about to become engaged in, research, development, production, manufacturing, importation, marketing, licensing, selling, or servicing of a Conflicting Product. (c) "Conflicting Product" means any product, process, system or service of any person or organization other than the Company or an Affiliate, in existence or under development, which is the same as or similar to or competes with a product, process, system or service upon which Executive works or has worked during the three year period ending on his Date of Termination, or about which Executive acquired or acquires Confidential Information. 7.3 Remedies. Executive recognizes and agrees that a breach of any or all of the provisions of Sections 7.1 and 7.2 will constitute immediate and irreparable harm to the Company for which damages cannot be readily calculated and for which damages are an inadequate remedy. Accordingly, Executive acknowledges that in addition to any and all remedies at law, the Company shall be entitled to specific performance or injunctive or other equitable relief to prevent the breach or threatened breach of Executive's obligations under this Agreement. 7.4 Intellectual Property. During the employment period, Executive shall disclose immediately to the Company all ideas, inventions and business plans that he makes, conceives, discovers or develops during the course of his employment with the Company, including any inventions, modifications, discoveries, developments, improvements, computer programs, processes, products or procedures (whether or not protectable upon application by copyright, patent, trademark, trade secret or other proprietary rights) ("Work Product") that: (i) relate to the business of the Company or any customer or supplier to the Company or any of the products or services being developed, manufactured, sold or otherwise provided by the Company or that may be used in relation therewith; or (ii) result from tasks assigned to Executive by the Company; or (iii) result from the use of the premises or personal property (whether tangible or intangible) owned, leased or contracted for by the Company. Executive agrees that any Work Product shall be the property of the Company and, if subject to copyright, shall be considered a "work made for hire" within the meaning of the Copyright Act of 1976, as amended (the "Act"). If and to the extent that any such Work Product is found as a matter of law not to be a "work made for hire" within the meaning of the Act, Executive expressly assigns to the Company all right, title and -15- interest in and to the Work Product, and all copies thereof, and the copyright, patent, trademark, trade secret and all their proprietary rights in the Work Product, without further consideration, free from any claim, lien for balance due or rights of retention thereto on the part of Executive. (a) To the extent applicable, pursuant to Illinois Executive Patent Act, the Company hereby notifies Executive that the preceding paragraph does not apply to any inventions for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on the Executive's own time, unless: (i) the invention relates (a) to the Company's business, or (b) to the Company's actual or demonstrably anticipated research or development, or (ii) the invention results from any work performed by the Executive for the Company. (b) Executive agrees that upon disclosure of Work Product to the Company, Executive will, during his employment and at any time thereafter, at the request and cost of the Company all such documents and perform all such acts as the Company or its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world, and when so obtained or vested to renew and restore the same; and (ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection. (c) In the event that the Company is unable, after reasonable effort, to secure Executive's signature on any letters patent, copyright or other analogous protection relating to Work Product, whether because of Executive's physical or mental incapacity or for any other reason whatsoever, Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney-in-fact, to act for and on his behalf to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright and other analogous protection with the same legal force and effect as if personally executed by Executive. Article VIII. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY 8.1 Tax Gross-Up Payment. If at any time or from time to time it shall be determined that any payment to Executive pursuant to this Agreement or any other payment or benefit from the Company, any Affiliate, any shareholder of the Company or any other person would be subject to the excise tax imposed by Section 4999 of the Code or any similar tax payable under any United States federal, state, local, foreign or other law, then Executive shall receive and the Company shall pay or cause to be paid a Tax Gross-Up Payment with respect to all such excise taxes and other Taxes. The Tax Gross-Up Payment is intended to compensate Executive for all such excise taxes and any federal, state, local, foreign or other income, employment, or excise taxes or other taxes payable by Executive with respect to the Tax Gross-Up Payment. -16- Article IX. MISCELLANEOUS 9.1 Approvals. The Company represents and warrants to Executive it has taken all corporate action necessary to authorize this Agreement. 9.2 Full Settlement. The exclusive method for the Company to terminate its obligations to provide compensation or benefits to Executive pursuant to Articles IV and V of this Agreement is to terminate Executive's employment in compliance with all applicable requirements of Sections 6.1, 6.2, 6.3, 6.4 or 6.5 of this Agreement, as applicable, and to make the payments and provide the benefits specified in such applicable Section. 9.3 No Mitigation. In no event shall Executive be obligated to seek other employment or take any other action to mitigate the amounts payable to Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned as a result of Executive's employment by another employer, except that any continued welfare benefits provided for by Section 6.3(f) or Section 6.4(c) shall not duplicate any benefits that are provided to Executive and his family by such other employer and shall be secondary to any coverage provided by such other employer. 9.4 Enforcement. (a) If Executive incurs legal, accounting, expert witness or other fees, costs or expenses in an effort to establish entitlement to, or obtain compensation or benefits or Tax Gross-Up Payment under this Agreement, the Company shall reimburse Executive for such fees and expenses if the Executive prevails (after exhaustion of all available judicial remedies) and provide the Executive with a Tax Gross-Up Payment for any Taxes payable by Executive on such reimbursements. (b) If the Company fails to pay any amount provided under this Agreement when due, the Company shall pay interest on such amount at an annual rate equal to the lesser of (i) (A) the highest rate of interest charged by the Company's principal lender on its revolving credit agreements plus 200 basis points, or (B) in the absence of such a lender, 200 basis points over the prime commercial lending rate announced by The Wall Street Journal in effect from time to time during the period of such nonpayment, or (ii) the highest legally-permissible interest rate allowed to be charged under applicable law. 9.5 Release. Notwithstanding any provisions of this Agreement to the contrary, the Company's obligations to make payments and to provide benefits under Sections 6.3, 6.4 and 6.5, other than the obligation to pay Accrued Base Salary and Accrued Annual Bonus, are expressly conditioned upon the Executive's execution of a mutual release and waiver substantially in the form attached hereto as Exhibit A and the expiration of the Revocation Period as defined in the release. 9.6 Beneficiary. If Executive dies prior to receiving all of the amounts payable to him in accordance with the terms and conditions of this Agreement, such amounts shall be paid -17- to the beneficiary ("Beneficiary") designated by Executive in writing to the Company during his lifetime, or if no such Beneficiary is designated, to Executive's estate. Such payments shall be made in a lump sum to the extent so payable and, to the extent not payable in a lump sum, in accordance with the terms of this Agreement. Such payments shall not be less than the amount payable to Executive as if Executive had lived to the date of payment and were the payee. Executive, without the consent of any prior Beneficiary, may change his designation of Beneficiary or Beneficiaries at any time or from time to time by submitting to the Company a new designation in writing. 9.7 Assignment; Successors. The Company may not assign its respective rights and obligations under this Agreement without the prior written consent of Executive except to a successor of the Company's business. This Agreement shall be binding upon and inure to the benefit of Executive, his estate and Beneficiaries, the Company and the successors and permitted assigns of the Company. 9.8 Non-alienation. Except as is otherwise expressly provided herein, benefits payable under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by Executive, and any such attempt to dispose of any right to benefits payable hereunder shall be void. 9.9 Severability. If all or any part of this Agreement is declared to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of this Agreement not declared to be unlawful or invalid. Any provision so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such provision to the fullest extent possible while remaining lawful and valid. 9.10 Amendment; Waiver. This Agreement shall not be amended or modified except by written instrument executed by the Company and Executive. A waiver of any term, covenant or condition contained in this Agreement shall not be deemed a waiver of any other term, covenant or condition, and any waiver of any default in any such term, covenant or condition shall not be deemed a waiver of any later default thereof or of any other term, covenant or condition. 9.11 Notices. All notices hereunder shall be in writing and delivered by hand, by nationally-recognized delivery service that guarantees overnight delivery, or by first-class, registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Company, to: Chief Executive Officer Amcol International Corporation One North Arlington 1500 West Shore Drive Arlington Heights, IL 60004-7803 If to Executive, to: (at his most recent home address or facsimile number on file with the Company) -18- Either party may from time to time designate a new address by notice given in accordance with this Section. Notice shall be effective when actually received by the addressee. 9.12 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument. 9.13 Captions. The captions of this Agreement are not a part of the provisions hereof and shall have no force or effect. 9.14 Entire Agreement. This Agreement forms the entire agreement between the parties hereto with respect to the subject matter contained in the Agreement and shall supersede all prior agreements, promises and representations regarding employment, compensation, severance or other payments contingent upon termination of employment, whether in writing or otherwise, including but not limited to that certain change of control agreement dated September 21, 2000 by and between the Company and the Executive. 9.15 Applicable Law. This Agreement shall be interpreted and construed in accordance with the laws of the State of Illinois, without regard to its choice of law principles. 9.16 Survival of Executive's Rights. All of Executive's rights hereunder, including his rights to compensation and benefits, and his obligations under Article VI and Article VII hereof, shall survive the termination of Executive's employment or the termination of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. AMCOL INTERNATIONAL CORPORATION By: ------------------------------------- Its: Chief Executive Officer ------------------------------------ EXECUTIVE ----------------------------------------- Ryan F. McKendrick -19- EX-10.30 7 dex1030.txt EMPLOYMENT AGMT. DATED 3/15/02 - WASHOW EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (the "Agreement") dated as of March 15, 2002 ("Agreement Date") by and between Amcol International Corporation, a Delaware corporation (the "Company"), and Lawrence E. Washow ("Executive"), a resident of Illinois. In consideration of the mutual agreements contained herein, the Company and Executive agree as follows: Article I. DEFINITIONS The terms set forth below have the following meanings (such meanings to be applicable to both the singular and plural forms, except where otherwise expressly indicated): 1.1 "Accrued Annual Bonus" means the amount of any Annual Bonus earned but not yet paid with respect to any Fiscal Year ended prior to the Date of Termination. 1.2 "Accrued Base Salary" means the amount of Executive's Base Salary which is accrued but not yet paid as of the Date of Termination. 1.3 "Affiliate" means any Person that directly or indirectly controls, is controlled by, or is under common control with, the applicable Person. For the purposes of this definition, the term "control" when used with respect to any Person means the power to direct or cause the direction of management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. 1.4 "Agreement" - see the introductory paragraph of this Agreement. 1.5 "Agreement Date" -- see the introductory paragraph of this Agreement. 1.6 "Anniversary Date" means any annual anniversary of the Agreement Date. 1.7 "Annual Bonus" - see Section 4.2. 1.8 "Annualized Bonus" means, as of any date, the greatest of the following amounts that is determinable and applicable: (i) the Target Annual Bonus for the Fiscal Year during which the Date of Termination occurs; and (ii) the average of the Annual Bonuses paid or payable to Executive in respect of the three most recent Fiscal Years ended on or before such date; provided that, in subsection (ii) above, annual bonuses paid in respect of Executive prior to the Agreement Date shall be included in such computation if, as of such date, three years have not elapsed since the Agreement Date; and further provided that if the Executive has not been employed by the Company for three full Fiscal Years ended on or before the Date of Termination, any bonus payable in respect of a partial Fiscal Year shall be annualized and the average of the annual bonuses shall be determined based upon such annualized bonus and the bonuses paid or payable to the Executive in respect of any other full Fiscal Years. 1.9 "Base Salary" -- see Section 4.1. 1.10 "Beneficial Owner" means such term as defined in Rule 13d-3 (or any successor rule) of the SEC under the Exchange Act. 1.11 "Beneficiary" - see Section 9.6. 1.12 "Board" means the Board of Directors of the Company. 1.13 "Cause" means any of the following: (a) Executive's commission of a felony or misdemeanor that involves fraud, dishonesty or moral turpitude, (b) Executive's willful or intentional material breach of this Agreement, or (c) willful or intentional material misconduct by Executive in the performance of his duties under this Agreement. For purposes of clauses (b) and (c) of the preceding sentence, Cause shall not include bad judgment or negligence which results from the Executive's good faith efforts to perform his duties. 1.14 "Change of Control" means any one or more of the following: (a) any person (as such term is used in Rule 13d-5 under the Exchange Act) or group (as such term is defined in Section 3(a)(9) and 13(d)(3) of the Exchange Act), other than a Subsidiary, any employee benefit plan (or any related trust) of the Company or any of its Subsidiaries or any Excluded Person, becomes the Beneficial Owner of 50.1% or more of the common stock of the Company or of Voting Securities representing 50.1% or more of the combined voting power of the Company (such a person or group, a "50.1% Owner"), except that (i) no Change of Control shall be deemed to have occurred solely by reason of such beneficial ownership by a corporation with respect to which both more than 49.9% of the common stock of such corporation and Voting Securities representing more than 49.9% of the aggregate voting power of such corporation are then owned, directly or indirectly, by the persons who were the direct or indirect owners of the common stock and Voting Securities of the Company immediately before such acquisition in substantially the same proportions as their ownership, immediately before such acquisition, of the common stock and Voting Securities of the Company, as the case may be and (ii) such corporation shall not be deemed a 50.1% Owner; or (b) the Incumbent Directors (determined using the Agreement Date as the baseline date) cease for any reason to constitute at least one-half of the directors of the Company then serving; or -2- (c) immediately prior to the consummation by the Company of a merger, reorganization, consolidation, or similar transaction, or a plan or agreement for the sale or other disposition of 50.1% of the consolidated assets of the Company or a plan of liquidation of the Company (any of the foregoing transactions, a "Reorganization Transaction") which is not an Exempt Reorganization Transaction (provided however, there shall be no Change of Control unless the Reorganization Transaction is actually consummated); or (d) the approval by the stockholders of the Company of a plan of liquidation of the Company which, based on information included in the proxy and other written materials distributed to the Company's stockholders in connection with the solicitation by the Company of such stockholder approval, is not expected to qualify as an Exempt Reorganization Transaction; or (e) if the Executive's primary responsibility is being the President of a Subsidiary, the sale by the Company of all of its stock in the Subsidiary or the sale or other disposition of all of the assets of the Subsidiary. Notwithstanding the occurrence of any of the foregoing events, a Change of Control shall not occur with respect to a Executive if, in advance of such event, the Executive agrees in writing that such event shall not constitute a Change of Control. 1.15 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.16 "Company" -- see the introductory paragraph to this Agreement. 1.17 "Date of Termination" means the date of the receipt of the Notice of Termination by Executive (if such Notice is given by the Company) or by the Company (if such Notice is given by Executive), or any later date, not more than 15 days after the giving of such Notice, specified in such notice; provided, however, that: (i) if Executive's employment is terminated by reason of death, the Date of Termination shall be the date of Executive's death; and (ii) if Executive's employment is terminated by reason of Disability, the Date of Termination shall be the 30th day after Executive's receipt of the physician's certification of Disability, unless, before such date, Executive shall have resumed the full-time performance of Executive's duties; and (iii) if Executive terminates his employment without Good Reason or if the Company terminates Executive's employment without Cause, the Date of Termination shall be the 90th day after the giving of such Notice; and (iv) if no Notice of Termination is given, the Date of Termination shall be the last date on which Executive is employed by the Company. 1.18 "Disability" means a mental or physical condition which renders Executive unable or incompetent to carry out the material job responsibilities which such Executive held or -3- the material duties to which Executive was assigned at the time the disability was incurred, which has existed for at least six months and which in the certified opinion of a physician mutually agreed upon by the Company and Executive (which agreement neither party shall unreasonably withhold) is expected to be permanent or to last for an indefinite duration or a duration in excess of six months. 1.19 "Employment Period" - see Section 3.1. 1.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.21 "Excluded Person" means any of the Paul Bechtner Trust, Everett P. Weaver, William D. Weaver or any Named Executive, any Affiliates or Family Member of any of the foregoing and any group (as such term is defined in Section 3(a)(9) and 13(d)(3) of the Exchange Act) of which any of the foregoing is a member. 1.22 "Executive" - see the introductory paragraph of this Agreement. 1.23 "Exempt Reorganization Transaction" means a Reorganization Transaction which results in (i) the Persons who were the direct or indirect owners of the outstanding common stock and Voting Securities of the Company immediately before such Reorganization Transaction becoming, immediately after the consummation of such Reorganization Transaction, the direct or indirect owners of both more than 49.9% of the then-outstanding common stock of the Surviving Corporation and Voting Securities representing more than 49.9% of the aggregate voting power of the Surviving Corporation, in substantially the same respective proportions as such Persons' ownership of the common stock and Voting Securities of the Company immediately before such Reorganization Transaction; or (ii) the Excluded Person owning 50% or more of the common stock of the Surviving Corporation or Voting Securities representing 50% or more of the combined voting power of the Surviving Corporation. 1.24 "Family Member" means, with respect to the applicable Person, a spouse, ancestor, lineal descendant, or spouse of a lineal descendant, including without limitation descendants by adoption. 1.25 "Fiscal Year" means the fiscal year used in connection with the preparation of the consolidated financial statements of the Company. 1.26 "Good Reason" means the occurrence of any one of the following events unless Executive specifically agrees in writing that such event shall not be Good Reason: (a) any material breach of the Agreement by the Company, provided, however, that no breach of this Agreement shall constitute Good Reason unless Executive gives the Company 30 days' prior written notice of such breach and the Company fails to cure such breach within the 30-day period; (b) the failure of either the Company to assign this Agreement to a successor of the Company or failure of a successor of the Company to expressly assume and agree to be bound by the Agreement; or -4- (c) a Termination of Employment by Executive for any reason or no reason during the 30-day period commencing six months after a Change of Control. In the event of the occurrence or omission constituting Good Reason other than an event described in subsection (c) above, Executive may within 90 days after such event occurs notify the Company of the events constituting such Good Reason by a Notice of Termination. In the event of the occurrence constituting Good Reason in subsection (c) above, Executive may within the 30 day period commencing six months after a Change of Control notify the Company of the events constituting such Good Reason by a Notice of Termination. 1.27 "including" means including without limitation. 1.28 "Incumbent Directors" means, as of any specified baseline date, individuals then serving as members of the Board who were members of the Board as of the date immediately preceding such baseline date; provided that any subsequently-appointed or elected member of the Board whose election, or nomination for election by stockholders of the Company or the Surviving Corporation, as applicable, was approved by a vote or written consent of at least one-half of the directors then comprising the Incumbent Directors shall also thereafter be considered an Incumbent Director, unless the initial assumption of office of such subsequently-elected or appointed director was in connection with (i) an actual or threatened election contest, including a consent solicitation, relating to the election or removal of one or more members of the Board, (ii) a "tender offer" (as such term is used in Section 14(d) of the Exchange Act), (iii) a proposed Reorganization Transaction, or (iv) a request, nomination or suggestion of any Beneficial Owner of Voting Securities representing 35% or more of the aggregate voting power of the Voting Securities of the Company or the Surviving Corporation, as applicable. 1.29 "Named Executive" means any individual listed on Exhibit A except to the extent the individual had a termination of employment not less than 120 days prior to the applicable event potentially constituting a Change of Control and any other employee or officer of the Company designated by the Board and who is a party to an agreement substantially in the same form as this Agreement (with variation in the amount of compensation and benefits payable under the agreement) and entered into by the employee or officer not less than 120 days prior to the applicable event potentially constituting a Change of Control. 1.30 "Notice of Termination" means a written notice given in accordance with Section 9.11 which sets forth (a) the specific termination provision in this Agreement relied upon by the party giving such notice, (b) in reasonable detail the specific facts and circumstances claimed to provide a basis for such Termination of Employment, and (c) if the Date of Termination is other than the date of receipt of such Notice of Termination, the Date of Termination. 1.31 "Person" means any individual, sole proprietorship, partnership, joint venture, limited liability company, trust, unincorporated organization, corporation, institution, public benefit corporation, entity or government instrumentality, division, agency, body or department. -5- 1.32 "Prorata Annual Bonus" means the product of (i) the Annual Bonus that Executive would have earned for the Fiscal Year during which the Executive's Date of Termination occurs based upon the Company's achievement of the Target Annual Goals during such Fiscal Year, multiplied by (ii) a fraction of which the numerator is the number of days which have elapsed in such Fiscal Year through the Date of Termination and the denominator of which is 365. 1.33 "Prorata Annualized Bonus" means the product of (i) the Executive's Annualized Bonus, multiplied by (ii) a fraction of which the numerator is the number of days which have elapsed in such Fiscal Year through the Date of Termination and the denominator of which is 365. 1.34 "Reorganization Transaction" -- see the definition of "Change of Control." 1.35 "Subsidiary" means, with respect to any Person, (a) any corporation of which more than 50% of the Voting Securities are at the time, directly or indirectly, owned by such Person, and (b) any partnership or limited liability company in which such Person has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%. 1.36 "Surviving Corporation" means the corporation resulting from a Reorganization Transaction or, if securities representing more than 50% of the aggregate Voting Power of such resulting corporation are directly or indirectly owned by another corporation, such other corporation. 1.37 "Target Annual Bonus" -- see Section 4.2. 1.38 "Target Annual Goals" -- see Section 4.2. 1.39 "Tax Gross-Up Payment" means an amount payable to Executive such that after payment of Taxes on such amount there remains a balance sufficient to pay the Taxes being reimbursed. 1.40 "Taxes" means the incremental federal, state, local and foreign income, employment, excise and other taxes payable by Executive with respect to any applicable item of income. 1.41 "Termination For Good Reason" means a Termination of Employment by Executive for a Good Reason. 1.42 "Termination of Employment" means a termination by the Company or Executive of Executive's employment. 1.43 "Termination Without Cause" means a Termination of Employment by the Company for any reason other than Cause or Executive's death or Disability. 1.44 "Transitional Services Period" - see Section 6.3. -6- 1.45 "Voting Securities" of a corporation means securities of such corporation that are entitled to vote generally in the election of directors of such corporation, but not including any other class of securities of such corporation that may have voting power by reason of the occurrence of a contingency. Article II. DUTIES 2.1 Duties. During the Employment Period, the Company shall employ Executive as Chief Executive Officer of the Company, and in connection therewith, the Executive shall perform such duties and responsibilities as may be assigned to him from time to time by, or under the authority of, the Board or any of their designees, and in the absence of such assignment, such duties customary to such office as is necessary to the operations of the Company. Executive shall devote all of his business time, attention and effort during normal business hours, excluding any periods of disability, vacation, or sick leave to which Executive is entitled, to the affairs of the Company and shall use his best efforts to promote the interests of the Company. 2.2 Other Activities. Executive may serve on civic or charitable boards or committees, deliver lectures, fulfill speaking engagements or teach at educational institutions, and manage personal investments; provided that such activities do not significantly interfere with the performance of Executive's duties under this Agreement. Executive may serve on corporate board or committees with the prior written consent of the Board. Article III. EMPLOYMENT PERIOD 3.1 Employment Period. Subject to the termination provisions hereinafter provided, the term of Executive's employment under this Agreement (the "Employment Period") shall begin on the Agreement Date and end on the Anniversary Date which is three years after such date or, if later, such later date to which the Employment Period is extended pursuant to the following sentence. On the date which is two and one-half years after the Agreement Date and thereafter, the Employment Period (assuming that an Expiration Notice to the effect that the Agreement shall expire on the Anniversary Date which is three years after the Agreement Date has not been delivered by the Executive or Company to the other prior to the date which is two and one-half years after the Agreement Date) shall be automatically extended each day by one day to create a new six month term until, at any time after the date which is two and one-half years after the Agreement Date the Company delivers written notice (an "Expiration Notice") to Executive or Executive delivers an Expiration Notice to the Company, in either case, to the effect that the Agreement shall expire on a date specified in the Expiration Notice (the "Expiration Date") that is not less than 6 months after the date the Expiration Notice is delivered to the Company or the Executive, respectively. The Employment Period shall end prior to the end of the Employment Period as described above upon the Executive's Date of Termination even if the Executive continues to provide the services described in Section 6.3(e). The -7- employment of Executive by the Company shall not be terminated other than in accordance with Article VI. Article IV. COMPENSATION 4.1 Salary. During the Employment Period, the Company shall pay or cause to be paid to Executive in accordance with its normal payroll practices (but not less frequently than monthly) an annual salary at a rate of $ 432,000 per year ("Base Salary"). During the Employment Period, the Base Salary shall be reviewed at least annually and may be increased from time to time as shall be determined by the Company. After any such increase, the term "Base Salary" shall thereafter refer to the increased amount. Any increase in Base Salary shall not limit or reduce any other obligation of the Company to Executive under this Agreement. Base Salary shall not be reduced at any time without the express written consent of Executive. 4.2 Annual Bonus. (a) The Company shall pay or cause to be paid to Executive an annual cash bonus ("Annual Bonus") in accordance with the terms hereof for each Fiscal Year which begins or ends during the Employment Period. Executive shall be eligible for an Annual Bonus based upon target performance goals (the "Target Annual Goals"), as determined by the Compensation Committee of the Board on an annual basis, which provides for a payment of at least 100.0% of Executive's Base Salary ("Target Annual Bonus") upon the Executive's achievement of the Target Annual Goals. The Target Annual Goals shall be set as described above no later than February 28 of each Fiscal Year except that in the case of the 2001 Fiscal Year if the Target Annual Goals have not been set prior to the Agreement Date, the Target Annual Goals shall be set within the first 60 days after the Agreement Date. (b) The Company shall pay or cause to be paid the entire Annual Bonus that is payable with respect to a Fiscal Year in cash as soon as practicable after the Company can determine whether and the degree to which Target Annual Goals have been achieved following the close of such Fiscal Year. Any such Annual Bonus shall in any event be paid within 90 days after the end of the Fiscal Year. Article V. OTHER BENEFITS 5.1 Stock Option, Restricted Stock and Other Equity Incentive Plans. In addition to Base Salary and an Annual Bonus, Executive shall be eligible to participate during the Employment Period in all stock option, restricted stock and other equity incentive plans, practices, policies and programs of the Company, in accordance with their terms as in effect from time to time. If a Change of Control occurs during the Employment Period (or, if applicable, the Transitional Services Period), all outstanding stock options, restricted stock and -8- other equity compensation granted to Executive (whether before, on or after the Agreement Date) shall become fully vested and exercisable. 5.2 Incentive, Savings and Retirement Plans. In addition to Base Salary and Annual Bonus, Executive shall be entitled to participate during the Employment Period in all incentives (other than those provided for in Section 5.1), savings and retirement plans, practices, policies and programs that are from time to time applicable to any other comparable senior executive of the Company including any supplemental executive retirement plan, in accordance with their terms as in effect from time to time. 5.3 Welfare Benefits. During the Employment Period, Executive and his family shall be eligible to participate in, and shall receive all benefits under, welfare benefit plans, practices, policies and programs provided by the Company (including medical, prescription, dental, disability, salary continuance, employee life, group life, dependent life, accidental death and travel accident insurance plans and programs) applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time. 5.4 Fringe Benefits. During the Employment Period, Executive shall be entitled to fringe benefits applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time. 5.5 Vacation. During the Employment Period, Executive shall be entitled to paid vacation time in accordance with the plans, practices, policies, and programs applicable to any other comparable senior executive of the Company, in accordance with their terms as in effect from time to time, but in no event shall such vacation time be less than six weeks per calendar year. 5.6 Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable employment-related expenses incurred by Executive upon the receipt by the Company of an accounting in accordance with practices, policies, and procedures applicable to any comparable senior executive of the Company, in accordance with their terms as in effect from time to time. Article VI. TERMINATION BENEFITS 6.1 Termination for Cause or Other than for Good Reason, etc. If the Company terminates Executive's employment for Cause or Executive terminates his employment other than for Good Reason, death or Disability, the Company shall pay to Executive immediately after the Date of Termination an amount equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus and Executive shall not be entitled to receive any severance payment. 6.2 Termination for Death or Disability Prior to Change of Control or More than Seven Months after a Change of Control. If Executive's employment terminates due to his death or Disability prior to a Change of Control or more than seven months after a Change of Control, the Company shall pay to Executive or his Beneficiaries, as the case may be, (i) immediately -9- after the Date of Termination an amount which is equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus, and (ii) at the time described in Section 4.2(b), an amount which is equal to the Executive's Prorata Annual Bonus. 6.3 Termination Without Cause or for Good Reason Prior to Change of Control. In the event of a Termination Without Cause or a Termination for Good Reason prior to a Change of Control, Executive shall receive the following: (a) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to the sum of Executive's Accrued Base Salary and Accrued Annual Bonus; (b) at the time described in Section 4.2(b), an amount which is equal to the Executive's Prorata Annual Bonus; (c) Base Salary payable on the same basis as in effect immediately prior to the Date of Termination for twenty-four months following the Executive's Date of Termination; (d) immediately after the Date of Termination, a lump-sum amount in immediately available funds of any amount then payable to Executive pursuant to Article VIII; (e) during the period (the "Transitional Services Period") beginning on the Executive's Date of Termination and ending on the earliest of (i) twenty-four months after the Executive's Date of Termination (ii) the date on which the Executive accepts a position with another employer, (iii) the date on which Executive breaches any of the provisions of Sections 7.1 and 7.2, and (iv) the date on which the Executive terminates his employment with the Company, the Executive shall remain an employee of the Company and shall only perform such transitional assignments for the Company as may be assigned to him from time to time by the Chief Executive Officer; (f) the benefits specified in Sections 5.2 (other than those provided by tax-qualified plans), 5.3 and 5.4 to which Executive is entitled as of the Date of Termination during the Transitional Services Period; provided that any coverage required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, ("COBRA") shall begin after the end of the Transitional Services Period; and (g) for purposes of the Company's stock option plans, restricted stock plans and other equity compensation plans, the Executive shall be considered an employee of the Company for all purposes under such plans through the end of the Transitional Services Period except Executive shall not be eligible for new grants under such plans. Notwithstanding any provisions of this Section 6.3 to the contrary, if Executive breaches any or all of the provisions of Sections 7.1 and 7.2, the payment of the Prorata Annual Bonus pursuant to Section 6.3(b) and the continuation of Base Salary and benefits pursuant to Sections 6.3(c), 6.3(f) (other than COBRA), and 6.3(g) shall cease upon such breach. In addition to the foregoing, and to protect and compensate the Company in the event of such breach by the -10- Executive, the Company shall be entitled to any and all remedies at law and equitable relief as described in Section 7.3. 6.4 Termination Without Cause or for Good Reason On or After Change of Control. In the event that the Executive has a Termination Without Cause or a Termination for Good Reason on or after a Change of Control, the Executive shall receive the following: (a) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to the sum of Executive's Accrued Base Salary, Accrued Annual Bonus and Prorata Annualized Bonus; (b) immediately after the Date of Termination, a lump sum amount in immediately available funds equal to three times the sum of (i) the Executive's Base Salary and (ii) the Executive's Annualized Bonus; (c) the benefits specified in Sections 5.2 (other than those provided by tax-qualified plans), 5.3 and 5.4 to which Executive is entitled as of the Date of Termination for three years following his Date of Termination on the same basis as if Executive was employed by the Company during such three year period; provided, that if any of the foregoing benefits described in 5.3 cannot be provided by the Company under the applicable benefit plan, the Executive shall receive in lieu of such benefits a cash lump sum payment immediately after the Date of Termination equal to three times the Company's annual contributions and premiums on behalf of the Executive to such plan (determined based upon the year in which the Date of Termination occurs) together with a Tax Gross-Up Payment for any Taxes payable by Executive on such payments; and further provided that any coverage required by COBRA shall begin three years after the Date of Termination (or, if earlier, as of the date on which the Executive's benefit giving rise to COBRA ceases); and (d) immediately after the Date of Termination, a lump-sum amount in immediately available funds of any amount then payable to Executive pursuant to Article VIII. Notwithstanding any provisions of this Section 6.4 to the contrary, if Executive breaches any or all of the provisions of Sections 7.1 and 7.2, the continuation of benefits pursuant to Section 6.4(c) shall cease upon such breach and, to prevent the Executive's unjust enrichment, the Executive shall immediately pay the Company an amount equal to (i) the amount that the Executive received from the Company pursuant to this Section 6.4, multiplied by (ii) a fraction of which the numerator is the number of days remaining from the date of the breach through the first anniversary of the Executive's Termination of Employment and the denominator of which is 365. In addition to the foregoing, and to protect and compensate the Company in the event of such breach by the Executive, the Company shall be entitled to any and all remedies at law and equitable relief as described in Section 7.3. 6.5 Termination for Death or Disability within Seven Months of a Change of Control. In the event that the Executive has a Termination of Employment due to death or Disability within seven months after a Change of Control, the Executive's Beneficiaries shall receive the -11- compensation and benefits described in Section 6.4 except that the continued benefits (or cash in lieu thereof) described in Section 6.4(c) shall be limited to the welfare benefits specified in Section 5.3. 6.6 Imminent Control Change. If an Imminent Control Change Date (as defined below) occurs on or within 30 days after the date on which the Company delivers a Notice of Termination to Executive terminating Executive's employment not for Cause and if a Change of Control occurs within 180 days after delivery of the Notice, the Executive's Termination of Employment pursuant to the Notice, shall be deemed a Termination of Employment Without Cause on or after a Change of Control and the Executive's rights and obligations shall be determined under Section 6.4 rather than Section 6.3. Any payments or benefits to be received by the Executive pursuant to Section 6.4 shall be reduced by any payments or benefits made or provided pursuant to Section 6.3. If an Imminent Control Change Date occurs on or within 30 days after the date on which the Executive has a Termination of Employment due to death or Disability and if a Change of Control occurs within 180 days after death or Disability, the Executive's Termination of Employment due to death or Disability shall be deemed a Termination of Employment due to death or Disability on or after a Change of Control and the Executive's Beneficiaries' rights and obligations shall be determined under Section 6.5 rather than Section 6.2. Any payments or benefits to be received by the Executive's Beneficiaries pursuant to Section 6.5 shall be reduced by any payments or benefits made or provided pursuant to Section 6.2. "Imminent Control Change Date" means any date on which occurs (a) a presentation to the Company's stockholders generally or any of the Company's directors or executive officers of a proposal or offer for a Change of Control, (b) the public announcement (whether by advertisement, press release, press interview, public statement, SEC filing or otherwise) of a proposal or offer for a Change of Control, or (c) such proposal or offer remains effective and unrevoked. 6.7 Other Rights. This Agreement shall not prevent or limit Executive's continuing or future participation in any benefit, bonus, incentive or other plan, program or policy provided by the Company and for which Executive may qualify, nor shall this Agreement limit or otherwise affect such rights as Executive may have under any other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, program or policy and any other payment or benefit required by law at or after the Date of Termination shall be payable in accordance with such plan, program or policy or applicable law except as expressly modified by this Agreement. 6.8 Termination Rights. Executive recognizes and agrees that the Company has the right to terminate his employment for any reason or no reason and that upon such termination the Executive's sole right is to receive compensation and benefits in accordance with the terms of this Agreement. Article VII. COVENANTS 7.1 Non-Disclosure and Non-Solicitation. Executive acknowledges that the successful marketing and development of the Company's products requires substantial time and -12- expense. Such efforts utilize and generate valuable confidential and proprietary information, of which Executive will obtain knowledge during the course of his employment with the Company. As used herein, "Confidential Information" means any information of the Company that the Company considers to be proprietary and treats as confidential or information of any third party that the Company is under an obligation to keep confidential, including but not limited to the following: (i) trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, (ii) employment status, salaries and other personnel information, decisions to offer employment, pre-employment testing and screening results, citizenship status, disability status, performance issues, executive evaluations, medical problems of executives and executives' families, garnishments and levies against wages, contents of employment agreements, statements regarding the financial condition of the Company or any subsidiary or affiliated entity, payments made to or expenses incurred by the Company or any of its executives, shareholders or directors, discounts given by the Company, vendors and other parties, minutes of Board meetings of the Company or any subsidiary or affiliated entities, contents of contracts, legal matters by or against the Company or any subsidiary or affiliated entities, business strategies, plans, proposals, names of customers and potential customers; and (iii) other information or materials of the Company marked or noticed by the Company as being confidential, whether constituting a trade secret or not, and whether proprietary or not, which are of value to the Company. For purposes of this Agreement, Confidential Information includes the foregoing and other information protected under the Illinois Trade Secrets Act. Confidential Information does not include: (i) information that at the time of disclosure is in the public domain through no fault of Executive; (ii) information received from a third party outside of the Company that was disclosed without a breach of any confidentiality obligation; (iii) information approved for public release by written authorization of the Company; or (iv) information that is required by law or an order of any court, agency or proceeding to be disclosed. Executive acknowledges and agrees that the Company shall retain exclusive ownership of all right, title, and interest in the Confidential Information, including any and all worldwide copyrights, trade secrets, patent, and confidential and proprietary information rights. Executive agrees to undertake the following obligations, which Executive acknowledges to be reasonably designed to protect the Company's legitimate business interests without unnecessarily or unreasonably restricting Executive's post-employment opportunities: (a) Executive agrees that he will not at any time, whether during or after the cessation of his employment, reveal or permit any other person or entity to reveal, any of the Confidential Information to any person or any entity, except, and only to the extent, as may be required in the ordinary course of performing Executive's assigned duties as an Executive of the Company, and Executive agrees to keep secret, and take all necessary precautions against disclosure of, all Confidential Information and all matters entrusted to him and not to use or attempt to use any Confidential Information in any manner that may cause injury or loss, or may be calculated to cause injury or loss, whether directly or indirectly, to the Company or its customers; (b) Executive agrees that during and after his employment he shall not remove, copy, duplicate or otherwise reproduce, use or permit to be used any notes, memoranda, reports, lists, records, drawings, sketches, specifications, software programs, data, documentation or other materials of any nature relating to any matter within the -13- scope of the business of the Company or concerning any of its dealings or affairs except as required to perform Executive's duties for the Company; (c) Upon cessation of his employment relationship with the Company, Executive shall immediately deliver to the Company all Confidential Information and other materials relating to the Company in his possession or delivered to him by the Company, including computer programs, files, notes, records, memoranda, reports, lists, drawings, sketches, specifications, data, charts, and other documents, materials and things ("Materials"), whether or not containing Confidential Information, whether or not prepared by Executive, it being agreed that all Materials shall be and remain the sole and exclusive property of the Company; (d) Without limiting the obligations of Section 7.1(c), Executive agrees that while Executive is employed by the Company prior to his Date of Termination and for a period of one year following his Date of Termination he will not, whether alone or as employee, owner, partner, officer, director, consultant, agent, executive, independent contractor, or stockholder of any firm, corporation or other commercial enterprise, directly or indirectly solicit business from: (i) any customer of the Company with which Executive had contact, participated in the contact, or about which Executive had knowledge of Confidential Information by reason of Executive's employment with the Company within the one year period preceding the Date of Termination, or (ii) any current customer prospect of the Company for whom Executive directly or indirectly assisted in the preparation or submission of a proposal made by the Company to such customer prospect during the one year period preceding the Date of Termination, unless the Company acknowledges in writing its intent not to further pursue such customer prospect; provided, further, that Executive shall, however, be permitted to own securities of any public company not in excess of 5% of any class of such securities and to own stock, partnership interests or other securities of any non-public entity not in excess of 5% of any class of such securities, and such ownership shall not be considered to be in competition with the Company; and (e) Except as may be required in the ordinary course of performing his duties as an employee of the Company, while employed prior to his Date of Termination and during the one year period immediately following the Date of Termination, Executive shall not, directly or indirectly, solicit or attempt to solicit any employee of the Company to work for any person, partnership or entity other than the Company, or engage in any activity that would cause any such employee to violate any agreement with the Company, or dissuade, or attempt to dissuade, any such employee from faithfully discharging such employee's contractual and fiduciary obligations to serve the Company's interests with undivided loyalty. 7.2 Non Competition. Without limiting the obligation imposed by Section 7.1, and to more fully protect the Confidential Information, Executive hereby agrees that while he is employed by the Company prior to the Date of Termination and for a period of one year following the Date of Termination, he will not, directly or indirectly, anywhere in the world where the Company conducts business, render services to any Conflicting Organization in any capacity in which the Confidential Information of the Company would reasonably be considered -14- to be useful to the Conflicting Organization; provided, however, that Executive may render services to a Conflicting Organization whose business is diversified (and which has separate and distinct divisions), as long as such services are being rendered to a part of the business that is separate and distinct from the part of the business that renders such person or entity a Conflicting Organization. (a) If, at the time of enforcement of Sections 7.1 and 7.2, a court shall hold that the duration, scope, area or activity restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope, area or activity restrictions reasonable and enforceable under such circumstances shall be substituted for the stated duration, scope, area or activity restrictions. (b) "Conflicting Organization" means for the purposes of this Section, any person or entity which is engaged in or about to become engaged in, research, development, production, manufacturing, importation, marketing, licensing, selling, or servicing of a Conflicting Product. (c) "Conflicting Product" means any product, process, system or service of any person or organization other than the Company or an Affiliate, in existence or under development, which is the same as or similar to or competes with a product, process, system or service upon which Executive works or has worked during the three year period ending on his Date of Termination, or about which Executive acquired or acquires Confidential Information. 7.3 Remedies. Executive recognizes and agrees that a breach of any or all of the provisions of Sections 7.1 and 7.2 will constitute immediate and irreparable harm to the Company for which damages cannot be readily calculated and for which damages are an inadequate remedy. Accordingly, Executive acknowledges that in addition to any and all remedies at law, the Company shall be entitled to specific performance or injunctive or other equitable relief to prevent the breach or threatened breach of Executive's obligations under this Agreement. 7.4 Intellectual Property. During the employment period, Executive shall disclose immediately to the Company all ideas, inventions and business plans that he makes, conceives, discovers or develops during the course of his employment with the Company, including any inventions, modifications, discoveries, developments, improvements, computer programs, processes, products or procedures (whether or not protectable upon application by copyright, patent, trademark, trade secret or other proprietary rights) ("Work Product") that: (i) relate to the business of the Company or any customer or supplier to the Company or any of the products or services being developed, manufactured, sold or otherwise provided by the Company or that may be used in relation therewith; or (ii) result from tasks assigned to Executive by the Company; or (iii) result from the use of the premises or personal property (whether tangible or intangible) owned, leased or contracted for by the Company. Executive agrees that any Work Product shall be the property of the Company and, if subject to copyright, shall be considered a "work made for hire" within the meaning of the Copyright Act of 1976, as amended (the "Act"). If and to the extent that any such Work Product is found as a matter of law not to be a "work made for hire" within the meaning of the Act, Executive expressly assigns to the Company all right, title and -15- interest in and to the Work Product, and all copies thereof, and the copyright, patent, trademark, trade secret and all their proprietary rights in the Work Product, without further consideration, free from any claim, lien for balance due or rights of retention thereto on the part of Executive. (a) To the extent applicable, pursuant to Illinois Executive Patent Act, the Company hereby notifies Executive that the preceding paragraph does not apply to any inventions for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on the Executive's own time, unless: (i) the invention relates (a) to the Company's business, or (b) to the Company's actual or demonstrably anticipated research or development, or (ii) the invention results from any work performed by the Executive for the Company. (b) Executive agrees that upon disclosure of Work Product to the Company, Executive will, during his employment and at any time thereafter, at the request and cost of the Company all such documents and perform all such acts as the Company or its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world, and when so obtained or vested to renew and restore the same; and (ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection. (c) In the event that the Company is unable, after reasonable effort, to secure Executive's signature on any letters patent, copyright or other analogous protection relating to Work Product, whether because of Executive's physical or mental incapacity or for any other reason whatsoever, Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney-in-fact, to act for and on his behalf to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright and other analogous protection with the same legal force and effect as if personally executed by Executive. Article VIII. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY 8.1 Tax Gross-Up Payment. If at any time or from time to time it shall be determined that any payment to Executive pursuant to this Agreement or any other payment or benefit from the Company, any Affiliate, any shareholder of the Company or any other person would be subject to the excise tax imposed by Section 4999 of the Code or any similar tax payable under any United States federal, state, local, foreign or other law, then Executive shall receive and the Company shall pay or cause to be paid a Tax Gross-Up Payment with respect to all such excise taxes and other Taxes. The Tax Gross-Up Payment is intended to compensate Executive for all such excise taxes and any federal, state, local, foreign or other income, employment, or excise taxes or other taxes payable by Executive with respect to the Tax Gross-Up Payment. -16- Article IX. MISCELLANEOUS 9.1 Approvals. The Company represents and warrants to Executive it has taken all corporate action necessary to authorize this Agreement. 9.2 Full Settlement. The exclusive method for the Company to terminate its obligations to provide compensation or benefits to Executive pursuant to Articles IV and V of this Agreement is to terminate Executive's employment in compliance with all applicable requirements of Sections 6.1, 6.2, 6.3, 6.4 or 6.5 of this Agreement, as applicable, and to make the payments and provide the benefits specified in such applicable Section. 9.3 No Mitigation. In no event shall Executive be obligated to seek other employment or take any other action to mitigate the amounts payable to Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned as a result of Executive's employment by another employer, except that any continued welfare benefits provided for by Section 6.3(f) or Section 6.4(c) shall not duplicate any benefits that are provided to Executive and his family by such other employer and shall be secondary to any coverage provided by such other employer. 9.4 Enforcement. (a) If Executive incurs legal, accounting, expert witness or other fees, costs or expenses in an effort to establish entitlement to, or obtain compensation or benefits or Tax Gross-Up Payment under this Agreement, the Company shall reimburse Executive for such fees and expenses if the Executive prevails (after exhaustion of all available judicial remedies) and provide the Executive with a Tax Gross-Up Payment for any Taxes payable by Executive on such reimbursements. (b) If the Company fails to pay any amount provided under this Agreement when due, the Company shall pay interest on such amount at an annual rate equal to the lesser of (i) (A) the highest rate of interest charged by the Company's principal lender on its revolving credit agreements plus 200 basis points, or (B) in the absence of such a lender, 200 basis points over the prime commercial lending rate announced by The Wall Street Journal in effect from time to time during the period of such nonpayment, or (ii) the highest legally-permissible interest rate allowed to be charged under applicable law. 9.5 Release. Notwithstanding any provisions of this Agreement to the contrary, the Company's obligations to make payments and to provide benefits under Sections 6.3, 6.4 and 6.5, other than the obligation to pay Accrued Base Salary and Accrued Annual Bonus, are expressly conditioned upon the Executive's execution of a mutual release and waiver substantially in the form attached hereto as Exhibit A and the expiration of the Revocation Period as defined in the release. 9.6 Beneficiary. If Executive dies prior to receiving all of the amounts payable to him in accordance with the terms and conditions of this Agreement, such amounts shall be paid -17- to the beneficiary ("Beneficiary") designated by Executive in writing to the Company during his lifetime, or if no such Beneficiary is designated, to Executive's estate. Such payments shall be made in a lump sum to the extent so payable and, to the extent not payable in a lump sum, in accordance with the terms of this Agreement. Such payments shall not be less than the amount payable to Executive as if Executive had lived to the date of payment and were the payee. Executive, without the consent of any prior Beneficiary, may change his designation of Beneficiary or Beneficiaries at any time or from time to time by submitting to the Company a new designation in writing. 9.7 Assignment; Successors. The Company may not assign its respective rights and obligations under this Agreement without the prior written consent of Executive except to a successor of the Company's business. This Agreement shall be binding upon and inure to the benefit of Executive, his estate and Beneficiaries, the Company and the successors and permitted assigns of the Company. 9.8 Non-alienation. Except as is otherwise expressly provided herein, benefits payable under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by Executive, and any such attempt to dispose of any right to benefits payable hereunder shall be void. 9.9 Severability. If all or any part of this Agreement is declared to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of this Agreement not declared to be unlawful or invalid. Any provision so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such provision to the fullest extent possible while remaining lawful and valid. 9.10 Amendment; Waiver. This Agreement shall not be amended or modified except by written instrument executed by the Company and Executive. A waiver of any term, covenant or condition contained in this Agreement shall not be deemed a waiver of any other term, covenant or condition, and any waiver of any default in any such term, covenant or condition shall not be deemed a waiver of any later default thereof or of any other term, covenant or condition. 9.11 Notices. All notices hereunder shall be in writing and delivered by hand, by nationally-recognized delivery service that guarantees overnight delivery, or by first-class, registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Company, to: Corporate Secretary Amcol International Corporation One North Arlington 1500 West Shore Drive Arlington Heights, IL 60004-7803 If to Executive, to: (at his most recent home address or facsimile number on file with the Company) -18- Either party may from time to time designate a new address by notice given in accordance with this Section. Notice shall be effective when actually received by the addressee. 9.12 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument. 9.13 Captions. The captions of this Agreement are not a part of the provisions hereof and shall have no force or effect. 9.14 Entire Agreement. This Agreement forms the entire agreement between the parties hereto with respect to the subject matter contained in the Agreement and shall supersede all prior agreements, promises and representations regarding employment, compensation, severance or other payments contingent upon termination of employment, whether in writing or otherwise, including but not limited to that certain change of control agreement dated September 20, 2000 by and between the Company and the Executive. 9.15 Applicable Law. This Agreement shall be interpreted and construed in accordance with the laws of the State of Illinois, without regard to its choice of law principles. 9.16 Survival of Executive's Rights. All of Executive's rights hereunder, including his rights to compensation and benefits, and his obligations under Article VI and Article VII hereof, shall survive the termination of Executive's employment or the termination of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. AMCOL INTERNATIONAL CORPORATION By: ------------------------------------ Its: Secretary ----------------------------------- EXECUTIVE ---------------------------------------- Lawrence E. Washow -19- -----END PRIVACY-ENHANCED MESSAGE-----