DICTAPHONE
Xxxx X. Xxxxxxx
Chairman & Chief Executive Officer
January 24, 1996
Xx. Xxxxxx X. Xxxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxxxx Xxxx
Xxxxxx, X00 0X0
Dear Xxx:
This letter will set forth our agreement concerning your employment
with Dictaphone Corporation effective 3/1/96 and supersedes any and all prior
offer letters.
1. THE JOB AND LOCATION
I am pleased to extend you an offer of employment with Dictaphone
Corporation as a Vice President, International Operations reporting directly to
me. In this capacity, you will of course, be a full-time member of the Executive
Committee. Your position will be based in London, England except for required
travel on company business. The company will not relocate you outside of London,
England unless you and I agree that the move is in the best interest of
Dictaphone.
2. COMPENSATION
Your annual base salary will be $220,000. As is current company
practice, your performance will be reviewed on an annual basis for consideration
of a merit increase based on the base structure and the performance management
grid in effect as of the date of your annual review. Your base pay will be paid
in accordance with the company's payroll procedure but, in any case, not less
frequently than monthly. We expect that should there be dual payroll
participation that your payment will be on the basis of each of the separate
country payrolls and that no special payroll run will be required in order to
meet your personal tax needs.
To assist you with your transition into Dictaphone, I have agreed to
pay a one time sign-on bonus of $50,000. This will be payable to you on your
start date with Dictaphone.
In addition to your annual based salary, you are eligible to receive
a performance base bonus with a target of 35% of your base pay equaling
approximately
$77,000. As a performance based compensation employee, "PBC," your bonus is
determined on the basis of your individual performance and the performance of
Dictaphone Corporation as assessed by the Board of Directors. This can pay up to
100% of your base salary. I've enclosed a copy of the proposed PBC Group II (35%
target grid) Incentive Guide which has been forwarded to the Board of Directors
for approval for 1996. In addition, I've attached the proposed grid for a
Dictaphone "rating" guideline which has also been forwarded to the Board for
approval. You will note that the vertical rating for the Grid II bonus
delineates the payout based on the Dictaphone rating. The Dictaphone rating for
1996 will be based solely on corporate performance against the EBITDA target and
is self- explanatory. Your personal rating which is the horizontal access on the
grid will be based on 60% of the financial performance against budget for the
International group as mutually agreed upon at the beginning of the fiscal year.
The other 40% of your personal rating will be dependent upon your performance
against agreed upon objectives for the International Operation. I will expect
you and I to come to a conclusion within three weeks of your start date as to
what those targets for the remainder of the calendar year will be. As a
demonstration of my confidence in your ability to have a positive impact on the
International organization I have agreed that your bonus for 1996 (payable in
February, 1997) will be guaranteed at the 50% of base salary for that prorated
period of 1996 for which you are actively employed. In addition, I have agreed
that for 1997 fiscal year bonus payable in February, 1998 you will also be
guaranteed a bonus payout of 50% of the base salary in effect for 1997. This
guarantee assumes, of course, that you are actively employed by Dictaphone for
the period covered. For 1998 and thereafter, you will be eligible for a PBC
bonus based on the grid approved by the Board of Directors at the start of the
new year and comparable to other PBC Level II participants. It is my expectation
at this time that the on target bonus opportunity would be at 35% of the annual
base with a maximum bonus opportunity of not less than 100% for the grid II
bonus. All compensation plans, however, are reviewed on an annual basis and may
be changed at the company's discretion.
3. STOCK OPTION
As a PBC level executive a recommendation will be made to the Board
of Directors that you be offered stock options and an opportunity to participate
in the management equity options. The details of these plans will be discussed
in greater detail with you in the documents specifically designed to delineate
all of the terms and conditions of those plans. The recommendation to the Board
will be that you be offered 10,000 management equity options at $10 a share in
accordance with the Management Private Placement Memorandum. In addition, it
will be recommended that you be offered 30,000 stock options, 15,000 of which
will vest over a five year period and 15,000 of which will be performance based
on the total Dictaphone organizations performance against specific targets in
accordance with the Management Stock Option Plan. The relevant documents
covering these plans will be forwarded to Mr. Album on your behalf over the next
few business days. In case of any discrepancy in terms and/or conditions the
formal plan documents will be the final authority. If you are approved for an
equity position you will, of course, be required to make a personal investment
of $100,000 to cover the management equity options. Dictaphone will make
available to you a loan of up to $50,000 under the same terms and conditions
afforded other executives buying equity in the company as of August 11, 1995.
4. BENEFITS
The company has agreed to offer you the appropriate benefits
depending upon availability and based on the plan documents or policies in
effect for each plan.
As a PBC level employee you are entitled to paid vacation time in
accordance with the current plans and practices of Dictaphone and will be
entitled to receive a minimum of four weeks paid vacation per calendar year.
5. DISABILITY BENEFITS
If, as a result of your incapacity due to physical or mental illness
you shall be unable to perform all of your duties hereunder by reason of the
illness you will be eligible for compensation under the company's long term
disability plan provided you are a participant of the plan. Any incapacity due
to physical or mental illness which is expected, based on bonafide medical
documentation, to continue for more than six consecutive months will be
considered grounds for termination and will invoke the "Executive Severance
Arrangement" as described hereunder.
6. EXPENSE REIMBURSEMENT
As a PBC level executive within the Dictaphone Team reporting to me,
you are eligible for participation in the Company Car Program which provides for
an allowance of $1,000 per month. Or, if you would prefer, the lease on a BMW
530 or comparable lease on a top-line fully loaded automobile as long as the
terms of the lease are reasonably acceptable to Dictaphone. You will also be
entitled to receive prompt reimbursement for all reasonable business and travel
expenses upon the companies receipt of accountings and in accordance with the
company policy on expense reimbursement. When you are required to be in the U.S.
for Dictaphone business, the company will pay for reasonable hotel
accommodations, meals and transportation.
7. TAX MATTERS
As we discussed, the company has agreed that dependent upon your
wishes and as is legally appropriate for Dictaphone, we will structure your
payment and benefit plans in such a way that is most tax efficient for you. You
acknowledge that you will remain responsible for the payment of all fees and
expenses of your external tax consultant and retain personal liability for
ensuring that the appropriate level of taxes have been paid to whatever taxing
authority you are deemed to be accountable to.
8. SEVERANCE TERMS
Your employment may be terminated at any time by the company with or
without cause. I have agreed to extend an "Executive Severance Arrangement"
including a severance pay period of up to two times your current annual base pay
in the event that your employment is terminated by Dictaphone for any reason
other than cause. This severance
will also be offered to you should your job be eliminated or a substantial
reduction in your responsibilities and/or compensation occur.
A termination for cause will be defined as your termination
resulting from a severe breach of business ethics, a material violation of
stated company policy which would otherwise result in your immediate
termination, your continued failure or refusal to perform any of the material
duties or responsibilities (other than failure due to a disability as defined in
Dictaphone's Disability Policy) reasonably required by Dictaphone hereunder with
written notice and an opportunity to cure within 45 days of that written notice,
acts of gross misconduct or a breach of your representations and warranties made
to Dictaphone herein. In the event of a termination for cause, you shall receive
your salary up through the date of termination and other accrued benefits and
pension rights.
In addition to your severance pay you will be eligible for payment
for any earned and unpaid annual bonus amount with respect to any fiscal year
ending prior to the date of termination and, for the fiscal year in which the
termination occurred, a prorata portion equal to the bonus which would have been
payable with respect to such termination year multiplied by a fraction equal to
(a) the number of days of the termination year elapsed prior to termination over
(b) 365. Any such bonus or prorata bonus will be paid in accordance with the
standard PBC bonus payments, normally in February of the subsequent fiscal year.
Under the terms of this "Executive Severance Arrangement" you will
be offered your salary at the time of separation for a period of up to two
years, payable on regular pay days. In the event that it is agreed upon that the
severance will not continue beyond the first twelve months severance pay may be
paid in a lump sum. The first year of severance pay will be payable to you in
full regardless of your employment status with any other company. At the
conclusion of the first 12 months, if you have not secured employment elsewhere,
the company will extend your severance pay on a month by month basis for a
maximum of 12 additional months. This extension, at the company's discretion,
will be dependent upon reasonable efforts to secure employment as judged by your
documented job search activities.
In addition, you will be eligible for out placement services at a
nationally recognized out placement firm of the company's choosing at the
service levels normally afforded Executive Vice Presidents for the first 12
months of the severance period. Medical, dental and life insurances will be
extended to you at the rate that you would have paid as an active employee under
the terms and conditions of those plans for up to 12 months or until you have
secured employment elsewhere.
In any event, the PBC severance package or the "Executive Severance
Arrangement" will require you to sign, as a condition or receiving severance
hereunder, a severance agreement including a release of the company from all
liability for any acts or violations relative to any administrative procedure
and/or federal, state or local law(s) covering the employment relationship. The
release will also include a non-compete, non- solicitation of employees,
non-disclosure of confidential information and an agreement to
cooperate with the company on any legal and otherwise reasonable business issues
requiring your involvement for resolution.
9. DIRECTORS AND OFFICERS LIABILITY INSURANCE
As a Vice President of the company you will be covered by the
company's Director's and Officer's Liability Insurance as in effect from time to
time. The company will not, however, indemnify and hold you harmless for any
claims arising from your prior employers with respect to your conduct or your
employment responsibilities in any case.
10. OTHER CONTINGENCIES
Your offer of employment remains contingent upon the following
conditions:
o Completion of the patent and confidentiality agreement. A
copy of this has been forwarded to you with my letter of
December 22, 1995.
o Compliance, as an express condition of employment, with the
Dictaphone's drug free workplace and substance abuse policy
statement including passing a pre-employment drug screening
test.
11. LAW APPLICABLE
This Agreement, the rights and obligations of the parties hereto,
and any claims or disputes relating thereto, shall be governed by and construed
in accordance with the laws of the State of New York (applicable to agreements
to be entered into and performed wholly within such state).
12. SUMMARY
I trust this addresses all major issues relative to your employment
offer with Dictaphone Corporation. I am confident that you will find this
position to be challenging and rewarding and afford you an opportunity to make a
significant contribution to the future of Dictaphone. I remain hopeful that you
will be able to begin this position no later than March 1, 1996. Please confirm
to me as soon as is reasonable what your expected start date will be and what
benefit structure and payroll structure is most appropriate for your personal
circumstances.
This letter contains all of the terms of your proposed employment
with Dictaphone; no change or modification of such terms shall be effective
unless set forth in writing, signed by yourself and Dictaphone. Further, by
signing below you represent and
warrant that your employment with Dictaphone hereunder will not violate the
terms of any agreements to which you are bound.
Sincerely,
/s/ Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx
Chairman and Chief Executive Officer
Agreed and Accepted:
/S/ XXXXXX X. XXXXXXX
Xxxxxx X. Xxxxxxx
Date:
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Minimum EBITDA and
Dictaphone Qualify/PERCENTAGE OVER PY
RATING DICTAPHONE
================================================================================
1 Less than 85% of Less than $64.5 Million
Budgeted EBITDA --
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2 85 - 89% of Budgeted $64.5 Million
EBITDA --
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3 90 - 93% of Budgeted $68.4 Million
EBITDA 6%
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4 94 - 100% of Budgeted $71.0 Million
EBITDA 10%
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5 Greater than 100% of $75.9 Million
Budgeted EBITDA 18%
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1996 Budgeted EBITDA $75.8 Million
1995 Forecasted EBITDA $64.5 Million
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PBC GROUP II INCENTIVE GUIDE
35% TARGET GRID
INDIVIDUAL RATING
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DICTAPHONE 1 2 3 4 5
RATING
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1 0 0 20 31 36
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2 0 0 28 34 40
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3 0 10 35 41 48
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4 0 12 40 46 53
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5 0 14 44 52 60-100
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