August 23, 2005
Sent via Facsimile
and U.S. Mail
Richard L. Katz, Esq.
441 Vine Street, Suite 4300
Cincinnati, OH 45202
Re: Robert E. Huggins
Dear Mr. Katz:
I want to thank you for our meeting on Friday, August 19, 2005 to discuss the termination of Mr. Huggins' employment with the University of Cincinnati. While UC remains committed to working out a reasonable resolution to our differences, it must do so within certain legal parameters. Thus, this letter represents the University's best and final offer regarding the manner in which Bob Huggins will cease coaching Men's Basketball at UC.
In addition, notwithstanding our agreement to keep this matter confidential, information has been communicated to members of the media and influential members of the Cincinnati community regarding our meeting last Friday, and the status of negotiations generally. Accordingly, it is imperative that we resolve this matter quickly to avoid further speculation and rumor. To this end, I will need to hear from you by Wednesday August 24, 2005 at 2:00 p.m.
regarding this offer; otherwise the University will exercise its right to terminate Mr. Huggins' employment without cause pursuant to the clear and plain meaning of his employment contract.
Before setting forth the University's final proposal, I believe it is important that I briefly reconstruct a general timeline of events that transpired with your client, relative to these negotiations. For your convenience, I have attached the correspondence we have exchanged regarding this matter.
Specifically, on June 11, 2004, the University informed Mr. Huggins that it was terminating the automatic contract extension to his employment agreement (i.e., a rolling four-year contract). On May 11, 2005, representatives from the University met with Coach Huggins and informed him that his contract would not be extended beyond June 30, 2007, and that he had several options going forward. Those options included the following:
1. Mr. Huggins could coach through the end of his contract;
2. UC would terminate Mr. Huggins' contract without cause and pay your
client the buy-out amount set forth in the contract;
3. UC would terminate Mr. Huggins' contract without cause and pay your
client the buy-out amount set forth in the contract, but hire Mr. Huggins to perform some other duties for the University for a period of time, to allow Mr. Huggins time to continue accumulating credits towards full retirement benefits including the payment of health insurance; or
4. Mr. Huggins could offer some other option for UC to consider.
The University directed Mr. Huggins to consider these options and to then contact the University's General Counsel with a decision regarding which
option he wished to exercise. Neither you nor Mr. Huggins contacted UC as
directed by the institution at the May 11th meeting. Instead, Mr. Huggins held a press conference on May 16, 2005 where he announced that he planned on fulfilling his current contract. In light of the fact that Coach Huggins chose to deal with contract issues through the media, and without response to the options set forth by the University, UC issued a brief statement that it would not extend the coach's contract, but would honor the two remaining years through 2007.
Over the next several weeks, the University limited its comments on this situation in an attempt to respect the sensitivity of this employment matter and Mr. Huggins' privacy. Notwithstanding various media reports, any projection of the conditions of the buy-out of Mr. Huggins' employment contract remained totally speculative, derived in part from the actual wording of the contract and other information unconfirmed through the University.
On at least four occasions, from a period of May 16, 2005 to this summer, the University has been contacted either through you or personally by Mr.
Huggins through various University officials or friends of the University, concerning the possibility of reinstating either the four-year roll over or extending the contract. Most recently, I received a call from you in early
July requesting that we meet to discuss these same contract issues.
Thus, on July 12, we met and I memorialized that meeting in my August 8,
2005 letter to you. As set forth in the letter, you made three requests
during our meeting. First, you sought a three-year extension, which would extend the contract to five years. In the alternative, you sought a reinstatement of the four-year automatic extension that had been removed in June 2004.
Finally, you commented that if either of the above options were not possible, playing out the remaining two years on the contract was simply not wise "as it was not good for anyone." Thus, at my request, you proposed a third option, which was a payment of $2,630,000 ($1 million for each of the two years remaining on the contract and $630,000 tax liability as a result of an annuity). You also informed me that, for purposes of retirement and health benefits under the Ohio Public Employees Retirement System ("OPERS"), Mr. Huggins sought an employment arrangement with the University whereby the money would be paid out over at least five years.
Recall in my August 8th letter that the University accepted, without argument, that Mr. Huggins was unwilling to continue coaching without a contract extension. Given the events of the past and plans for the future, the University also believes that continuing the contract would be inadvisable. Accordingly, I informed you that the University agreed with you that two years remained on Mr. Huggins contract and that it was obligated to compensate him approximately $700,000 for each year. Moreover, the University was not necessarily opposed to paying him more, including the $630,000 tax liability, so long as there was a contractual rationale for doing so.
After the exchange of several letters, you and I agreed to meet to discuss options relative to our correspondences. At our Friday, August 19, 2005 meeting, we once again discussed several options. As this meeting, I reiterated that without a mutually acceptable agreement, the University would terminate Mr. Huggins' employment contract without cause, pursuant to section 5.1.2 of the Agreement, and sever its employment relationship with him on a date certain. Under the terms of the current contract, UC is to pay Mr. Huggins monthly payments at the rate of $700,000 per year. This works out to $58,333.33 for each month remaining on the contract, which ends on June 30, 2007. In addition, the University will pay Mr. Huggins the $630,000 that is remaining on the tax liability related to an annuity that was provided to Mr. Huggins by the University. While such a payment is not specifically noted in the employment contract, given the numerous previous discussions between University officials and Mr. Huggins, and partial payment of $70,000 that was made to Mr. Huggins in 2005 for the liability, the University believes that such an obligation is owed to him.
In addition, I discussed with you the possibility of the University providing additional compensation if Mr. Huggins would be willing to take on new responsibilities. As you know, the current contract does not permit the University to assign Mr. Huggins to any position other than head men's basketball coach without his written approval. Thus, I discussed with you the possibility of the University entering into a six month arrangement whereby Mr. Huggins would be compensated at a similar monthly rate that he is now compensated - taking into account all compensation and benefits that he receives as head basketball coach. Also, given that Mr. Huggins would no longer be employed after the expiration of this short term arrangement, the University was willing to pay for his (and any dependents) health coverage, under COBRA, for up to 18 months.
Finally, we were willing to discuss the possibility that there was some ambiguity as to the automatic rollover provision in the contract. We could make no guarantees but the University was prepared to consider that Mr.
Huggins had three years remaining on his contract. If we could find a legally tenable argument for why this ambiguity should result in a three year contract, I believe we could have reached an agreement valued at approximately $3 million.
Mr. Huggins rejected this proposal. First, while he was willing to accept the dollar amount, you still believe your client is owed much more under the contract. In particular, you believe that Mr. Huggins is owed $1 million per year, not $700,000, because the contract provides that so long as he coaches at the University, he is guaranteed $1 million per year under section 3.4.1 in the March 2002 Amendment. Second, notwithstanding written notice that was given to you on June 11, 2004 that the University was terminating the automatic contract extension referred to in the contract, you contend that Mr. Huggins has not two, but three years remaining on his contract. You suggest that a letter forwarded to Mr. Huggins by Bob Goin on June 24, 2005 turned his contract into a continuing three year contract
unless further notice is provided.
As to the former argument, the contract simply cannot be read in this manner. The contract stands on its own with no ambiguity as to what the dollar amount will be paid out per year should Mr. Huggins be terminated without cause. With respect to your second contention, while the June 24 letter may have allowed you to now raise some lack of clarity in the notice provided to Mr. Huggins, without further legal and factual support, I remain skeptical.
More importantly, you informed me that any agreement with Mr. Huggins that did not involve $3.6 million would require a longer employment agreement than six months. Apparently, your client seeks the maximum amount of his retirement benefits under State law so that he is eligible to receive health benefits immediately should he decide to retire and not seek employment elsewhere.
Put simply, Mr. Huggins is demanding more than what he is entitled to under the contract. Thus, we now stand at an impasse. Nevertheless, given Mr.
Huggins long history and service with UC, the University will try again to find a mutually acceptable resolution.
To this end, my offer of August 19, 2005 remains open. Under this option, Mr. Huggins would be paid approximately $3 million comprised of the triggering of Section 5.1.2; the payout of annuity tax liability; a short term employment arrangement including additional University health insurance and OPERS contributions; a legal and factual review of whether three years, not two, remained on the contract; and 18 months of COBRA health insurance.
Alternatively, the University would pay Mr. Huggins $1,913,333.33 as a result of the triggering of section 5.1.2, based on a September 1, 2005 termination date. This amount includes payment for the 22 months remaining on his contract and the tax liability. In addition, it is our understanding based on discussions with you on Friday, August 19, that effective December 31, 2005, Mr. Huggins will have 27.80 years of service credit with OPERS.
We have relied on you and your client for an accurate retirement credit number and will not adjust our position should this number prove incorrect at some future date. With 30 years of OPERS service, a state employee is eligible to retire at any age with no benefit reduction. For Mr. Huggins to obtain 30 years of credit, he would need to be employed until March 31, 2008.
While we both agree that the continuation of Mr. Huggins as head men's basketball coach is not desirable, and, therefore, no longer a viable option, the University does believe that he has special knowledge, skill, and ability that render his services to the University unique. In particular, we would offer an employment contract through March 31, 2008 whereby Mr. Huggins would work under the direction of Vice President Mitchell Livingston to assist in generating financial support for student athletes in need. Of course, should Mr. Huggins secure full-time employment outside of UC prior to March 31, 2008, the University would be entitled to terminate this new employment relationship.
Assuming Mr. Huggins does not find alternative employment during this period, Mr. Huggins would be paid $23,118.29 per month for a total of $716,667.00. With benefits, including health insurance and continued University contributions to OPERS, the compensation package for this two and one-half year period totals more than $860,000. Thus, including the
$1,913,333.33 payout, Mr. Huggins would receive a total compensation package
of approximately $2.77 million. This amount is consistent with your
initial request made to me on July 12, 2005. Moreover, with continued employment, based upon the information you provided, it allows Mr. Huggins to receive 30 years of OPERS service credit-a sticking point throughout our negotiations.
Under any new employment arrangement, Mr. Huggins must agree to refrain from participating in any management activity related to the Men's Basketball program at UC. In addition, he must agree to use his best efforts in meeting his job responsibilities. Mr. Huggins also must agree to represent the University of
Cincinnati positively in public and private forums and not engage in conduct that reflects adversely on the University. Finally, he must agree to perform his duties and personally comport himself at all times in a manner consistent with appropriate ethical standards set by the University.
I think we would both agree that these negotiations have gone on far too long. Mr. Huggins has clearly expressed, through you, his desire to move in another direction. The University, too, wishes to move on to the future in its Men's Basketball program. To this end, the Chair of UC's Board of Trustee, the President and Athletic Director have added their signature to this letter as evidence of the University's commitment to either of the options outlined above, but no other. Furthermore, they understand that if your client fails to select either option by 2:00 p.m. tomorrow, the University will exercise its rights pursuant to Mr. Huggins' existing contract. I look forward to hearing from you by 2:00 p.m. on Wednesday, August 24, 2005.
Vice President for Legal Affairs
and General Counsel
Bob Goin, Athletic Director
Nancy Zimpher, President
Phil Cox, Chairman of the Board of Trustees
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