EXHIBIT 10(III)A(3)

 

June 24, 2004

 

Mr. John K. Morgan

1074 Robin Lane

Atlanta, GA 30306

 

Dear John:

 

This letter agreement (“Agreement”) sets forth the terms and conditions of your
employment with Acuity Brands, Inc. (“Acuity” or the “Company”) and your
promotion to President and Chief Development Officer of Acuity, effective
January 20, 2004 (“Effective Date”). After you have reviewed the terms and
conditions of this letter, please sign below to signify your acceptance.

 

1. Title and Responsibilities. Effective as of the Effective Date, you
(hereinafter “Executive”) will serve as President and Chief Development Officer
of Acuity and will report to Vernon J. Nagel, as Vice Chairman currently and as
Chief Executive Officer as of September 1, 2004. Executive shall have such
duties, responsibilities, and authority as are commensurate with such positions,
as established by corporate law or Acuity’s governance documents or delegated to
him from time to time by the Chief Executive Officer and the Board. Executive
accepts the duties described above and agrees to render his services for the
term of this Agreement.

 

2. Term. This Agreement shall commence as of the Effective Date and continue in
effect until either party gives notice to the other of termination (the period
of this Agreement is hereinafter referred to as the “term of this Agreement”).
Either party may terminate this Agreement for any reason and at any time with or
without cause and with or without advance notice, subject to Executive’s and
Acuity’s rights under any severance agreement relating to Executive’s
termination of employment.

 

3. Extent of Services. Executive agrees that during the term of this Agreement
he will devote his full working time and requisite energy and skill to the
diligent performance of Executive’s duties. With the consent of the Board,
Executive may serve on the board of directors or board of trustees of other
companies or institutions, provided, however, that approval of the Board shall
be required as set forth in Acuity’s Corporate Governance Guidelines, as they
may be revised from time to time

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4. Consideration. As consideration for the services performed by Executive
pursuant to this Agreement and the restrictive covenants in Paragraph 5, Acuity
will compensate Executive during the term of this Agreement as follows:

 

4.1 Base Salary. Commencing on the Effective Date, Executive will be entitled to
an annual base salary of $425,000, subject to periodic review and change by the
Compensation Committee. Executive’s base salary will be payable in accordance
with Acuity’s regular payroll practices for executives as in effect from time to
time.

 

4.2 Benefits. Executive will be entitled to participate in all employee benefit
plans and perquisites of Acuity in effect from time to time (including health,
life, disability, dental, and retirement plans) in which executive officers of
Acuity are entitled to participate.

 

4.3 Annual Incentive. Executive will be eligible for an annual incentive payment
in accordance with the Management Compensation and Incentive Plan (the
“Incentive Plan”) and the Plan Rules thereunder in effect for each year.
Pursuant to current Plan Rules: (a) the amount of the incentive payment is
determined by Acuity’s overall financial performance and Executive’s individual
performance and (b) Executive’s target bonus will be 50% of base salary for the
fiscal year ending August 31, 2004. Executive’s target bonus for future years
will be determined by the Board. The Incentive Plan and the Plan Rules
thereunder may be modified at any time in Acuity’s sole discretion, subject to
any applicable shareholder approval requirements.

 

4.4 Restricted Stock. On the Effective Date, Acuity granted Executive 20,000
shares of Restricted Stock which will vest in full upon the fourth anniversary
of the date of grant. This Restricted Stock grant is subject to the additional
terms and conditions set forth in a separate Restricted Stock Award Agreement,
which is consistent with the agreements for other executive officers except as
otherwise provided herein.

 

4.5 Severance Agreement. Executive’s Severance Agreement with Acuity, dated as
of June 25, 2003 (“Severance Agreement”), will be amended and restated to
provide the following with respect to payments and benefits in the event that
Executive’s employment is involuntarily terminated by Acuity without Cause or is
terminated by Executive for Good Reason (both as defined in such agreement): (i)
the Severance Period will be 24 months; (ii) unvested Stock Options will
continue to vest during the Severance Period; (iii) Stock Options vested as of
Executive’s termination date and Stock Options that vest during the Severance
Period will remain exercisable for the shorter of the remaining exercise term or
the length of the Severance Period; (iv) Restricted Stock that is not
performance-based will be subject to accelerated vesting and will vest during
the Severance Period on a monthly pro rata basis determined from the date of
grant to the end of the Severance Period; (v)

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performance-based Restricted Stock for which performance targets are achieved
and a Vesting Start Date is established prior to Executive’s termination date
become fully vested and nonforfeitable as of the termination date and
performance-based Restricted Stock for which performance targets are achieved
and a Vesting Start Date is established during the Severance Period will
continue to vest during the Severance Period; (vi) the Matching and Supplemental
Subaccounts under the Supplemental Deferred Savings Plan will become 100% vested
and nonforfeitable as of Executive’s termination date and will be distributed
from the Plan at the end of the Severance Period; and (vii) credited service
under the SERP (as defined below) will continue to accrue during the Severance
Period. Executive and Acuity will enter into an amended and restated Severance
Agreement and such amendments to his outstanding Stock Options and Restricted
Stock Agreements as may be necessary to reflect the changes in this Paragraph
4.5

 

4.6 Change in Control of Acuity. Executive will continue to be covered by the
Severance Protection Agreement, dated as of November 30, 2001, with Acuity.

 

4.7 Supplemental Retirement Benefits. Executive will continue to be covered by
the Acuity Brands, Inc. 2002 Supplemental Executive Retirement Plan (“SERP”) and
the Acuity Brands, Inc. Supplemental Deferred Savings Plan.

 

4.8 Director and Officer Insurance. During the term of the Agreement and for a
period of three (3) years after Executive’s termination of employment, Executive
shall be entitled to director and officer liability insurance coverage for his
acts and omissions while an officer or director of the Company on a basis no
less favorable to Executive than the coverage provided to then current officers
and directors.

 

4.9 Legal Expenses. Acuity shall promptly pay the reasonable legal fees and
expenses incurred by Executive in connection with the negotiation and execution
of this Agreement, the Restricted Stock Award Agreement and the Amended and
Restated Severance Agreement with Acuity of even date herewith.

 

5. Confidentiality, Non-Solicitation and Non-Competition. In consideration of
the compensation and benefits provided pursuant to this Agreement, Executive
agrees that during the term of his employment by the Company and for the one
year period following his termination of employment with the Company, Executive
shall comply with the non-competition, non-recruitment and non-disclosure
restrictions attached hereto as Exhibits A, B and C respectively (the
“Restrictive Covenants”), provided, that if Executive is terminated by the
Company without Cause or Executive terminates his employment for Good Reason
under circumstances that entitle Executive to receive compensation and benefits
under the Severance Agreement, the restrictive covenants in Section 5.1 of the
Severance Agreement shall apply to Executive after termination of employment and
not the Restrictive Covenants as defined above. The Company and Executive
recognize that Executive may experience

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periodic material changes in his job title and/or to the duties,
responsibilities or services that he is called upon to perform on the behalf of
the Company. If Executive experiences such a material change, the parties shall,
as soon as is practicable, enter into a signed, written addendum to Exhibit A
hereto reflecting such material change. Moreover, in the event of any material
change in corporate organization (including, without limitation, spin-offs,
split-offs, or public offerings of subsidiaries’ stock) on the part of the
Direct Competitors set forth in Exhibit A hereto, the parties agree to amend
Exhibit A, as necessary, at the Company’s request, in order to reflect such
change. Upon execution, any such written modification to Exhibit A shall
represent an enforceable amendment to this Agreement and shall augment and
supplant the definitions of the terms Executive Services or Direct Competitor
set forth in Exhibit A hereto, as applicable.

 

6. Assignability. This Agreement is binding on Acuity and any successors of
Acuity. Acuity may assign this Agreement and its rights under this Agreement in
whole or in part to any corporation or other entity with or into which Acuity
may merge or consolidate or to which Acuity may transfer all or substantially
all of its respective assets. Acuity will require any successor by merger or
consolidation or transferee of all or substantially all of its assets, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that Acuity would be required to perform it if no such
succession had taken place.

 

7. Amendment, Waiver. No provisions of this Agreement may be modified, waived or
discharged unless the waiver, modification or discharge is agreed to in writing
signed by Executive and such officer or officers as may be specifically
designated by the Board to sign on their behalf. No waiver by any party at any
time of any breach by any other party of, or compliance with, any condition or
provision of this Agreement will be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.

 

8. Governing Law. The validity, interpretation, construction and performance of
this Agreement will be governed by the laws of the United States where
applicable and otherwise the substantive laws of the State of Georgia.

 

9. Construction of Agreement. It is the intent of the parties that if any
covenant or other provision hereof is determined to be unenforceable in any
part, that portion of the Agreement will be severed or modified by the Court so
as to permit enforcement of the Agreement to the extent reasonable. It is agreed
by the parties that the obligations set forth herein will be considered to be
independent of any other obligations between the parties, and the existence of
any other claim or defense will not affect the enforceability of this Agreement.
Except as otherwise expressly provided herein, all of the consideration to be
provided to Executive hereunder shall be paid or otherwise provided on and in
accordance with and subject to Acuity’s standard policies, practices, terms and
conditions applicable from time to time under Acuity’s plans, programs,
agreements and arrangements relating to compensation and benefits of the type
agreed to be provided, including without limitation the

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June 24, 2004

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terms and conditions of Acuity’s standard forms of stock option or other
applicable executive compensation agreements. Without limiting the foregoing,
any and all benefit plans or other plans, programs, agreements and arrangements
may be modified, amended, replaced or terminated at Acuity’s sole discretion
unless otherwise expressly provided therein or herein.

 

Sincerely,

ACUITY BRANDS, INC.

By:

 

/s/ James S. Balloun

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James S. Balloun, Chairman

And Chief Executive Officer

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June 24, 2004

Page 6

 

I, John K. Morgan, have thoroughly read the terms and conditions contained in
this letter pertaining to my employment by Acuity Brands, Inc. I fully agree to
be bound by these terms and conditions, including the Restrictive Covenants set
forth in Paragraph 5.

 

/s/ John K. Morgan

 

June 29, 2004

John K. Morgan

 

Date