EXHIBIT 10.3
[GRACE LOGO] XXXXXX X. XXXXX
[GRAPHIC OMITTED] President & Chief Operating Officer
X. X. Xxxxx & Co.
0000 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
April 22, 2005
Xx. Xxxxxxx X. Xxxxx
00000 Xxxxxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Dear Xxxx:
This letter agreement specifies the terms of your employment with X. X. Xxxxx &
Co. (the "Company"), which will be presented for approval to the Board of
Directors (the "Board") of the Company and/or the Compensation Committee of the
Board, as applicable, on April 27, 2005. I am extremely pleased that you have
agreed to join the Company and believe that you will make a valuable
contribution to the Company's future.
If you agree with the terms of this letter agreement, please sign where
indicated below and return one fully executed copy to me. An additional copy is
also enclosed for your records.
POSITION AND RESPONSIBILITIES
At its April 27 meeting, it is anticipated that the Board will elect you to the
position of "Vice President" of the Company (and of its subsidiary, X. X. Xxxxx
& Co. - Conn.), to be effective as of your commencement of employment with the
Company.
Your employment with the Company will commence on May 1, 2005. Your title will
be "Vice President of X. X. Xxxxx & Co. and President of Grace Performance
Chemicals." (As all other Company employees, you will actually be employed by X.
X. Xxxxx & Co. - Conn., a 100% owned subsidiary of the Company, but will be
elected an officer of both X. X. Xxxxx & Co. and X. X. Xxxxx & Co. - Conn.)
You will be an employee of the Company "at will" with no definite term of
employment, and you will be subject to the same requirements as other salaried
employees of the Company, except as provided under this letter agreement.
You will be head of, and responsible for, the operations of the Company's Grace
Performance Chemicals business unit, and you will report directly to me, in my
capacity as Chief Operating Officer, and as Chief Executive Officer, of the
Company. Your office will be located at Grace Performance Chemicals'
headquarters in Cambridge, Massachusetts, or at Corporate headquarters in
Columbia, Maryland, the decision to be made after you have evaluated the site
question and consulted with me.
Xxxxxxx X. Xxxxx 4/28/2005 Page 2
--------------------------------------------------------------------------------
COMPENSATION
1. Your initial annual base salary as corporate Vice President and President
of Grace Performance Chemicals will be $375,000.00. Thereafter, your base
salary will be subject to periodic reviews on the same basis and at the
same intervals as are applicable to other officers of the Company.
Your salary will cease to accrue immediately upon your termination of
employment with the Company, regardless of the reason for such
termination. (Note, however, the provisions under "Severance Pay
Arrangement.")
2. You will be eligible to participate in the Company's Annual Incentive
Compensation Program. For the 2005 calendar year, your targeted award
under the Program will be $285,000, based on the financial performance of
the Company and Grace Performance Chemicals and your personal achievement
during that year. The cash payment you actually receive under the Program
for 2005 (the "2005 AICP Payment") will be paid to you in March 2006 at
the same time other Program participants receive their payments for 2005,
provided that the 2005 AICP Payment you actually receive will not be less
than $285,000; subject to the requirements of the remainder of this
paragraph. You will receive your 2005 AICP Payment only if you are
employed by the Company on that March 2006 payment date or if your
employment is terminated by the Company without "Cause" (as defined
below) before that date. You will not be entitled to that payment if you
terminate your employment with the Company, or are terminated by the
Company for "Cause," prior to that March 2006 payment date.
Under the Program, awards for a calendar year are generally paid during
March of the following calendar year and are subject to Board approval.
In general, the amount of award paid to any participant may range from 0%
to 200% of the participant's targeted award for the year, depending on
individual performance and the extent to which the Company (and any
applicable business unit) achieves (or surpasses) certain financial
goals. Also, a Program participant is not entitled to payment of an award
for a calendar year, if the participant is not an active employee of the
Company on the date the award is actually paid. From time to time, the
individual incentive targets are reviewed and adjusted as necessary based
on competitive practice. These and the other provisions of the Program
will apply to you in the same manner as applicable to other Program
participants, except as specified in the above paragraph.
3. You will be eligible for a targeted award under the Company's Long-Term
Incentive Plan (the "LTIP") for the 2005 - 2007 performance period
(subject to the Plan's approval in bankruptcy court) in the amount of
$335,000, prorated for your actual time of active employment during the
performance period. You will also participate in the 2004 - 2006 LTIP and
the 2003 - 2005 LTIP with a targeted award under each of $400,000,
prorated for your actual time of active employment during each LTIP's
performance period. The terms of your award under all LTIPs, shall be the
same as the terms governing the awards of the other participants under
the applicable LTIP, including the requirement of active employment with
the Company on the date an LTIP payment is made to the LTIP participants,
in order to be entitled to such a payment.
4. Consistent with your election as an officer of the Company, the Board
will be requested to authorize the Company to enter into a written
Executive Xxxxxxxxx
Xxxxxxx X. Xxxxx 4/28/2005 Page 3
--------------------------------------------------------------------------------
Agreement, or a so-called "golden parachute," with you. In general, the
terms of that agreement will provide for a severance payment of 3.00
times the sum of your annual base salary plus your targeted annual
incentive compensation award (adjusted in accordance with the terms of
that agreement), and certain other benefits, in the event your employment
terminates under certain conditions following a change-in-control of the
Company. The form and provisions of your Executive Severance Agreement
will be the same as applicable to other elected officers of the Company.
Please refer to the Executive Severance Agreement itself for definition
of "change in control", "employment termination" and other particulars of
this arrangement.
DEFINITION OF CAUSE
"Cause", for purposes of this letter agreement, means:
(i) Commission by you of a criminal act (i.e., any act which, if successfully
prosecuted by the appropriate authorities would constitute a crime under
State or Federal law) or of willful misconduct (including but not limited
to violating written policies of the Company), either of which has had or
will have a direct material adverse effect upon the business affairs,
reputation, properties, operations or results of operations or financial
condition of the Company,
(ii) Refusal or failure of you to comply with the mandates of the Company or
failure by you to substantially perform your duties as a corporate Vice
President and President of Grace Performance Chemicals, other than such
failure resulting from your total or partial incapacity due to physical
or mental illness, which refusal or failure has not been cured within 30
days after notice has been given to you, or
(iii) Material breach of any of the terms of this agreement by you, which
breach has not been cured within 30 days after notice has been given to
you.
SEVERANCE PAY ARRANGEMENT
If you are involuntarily terminated by the Company under circumstances in which
you would qualify for severance pay under the terms of the Xxxxx Xxxxxxxxx Pay
Plan for Salaried Employees (the "Xxxxx Xxxxxxxxx Plan"), then you will be
entitled to a severance payment of 1.5 times a dollar amount equal to your
annual base salary at the time your employment is terminated. This severance pay
arrangement shall be governed by the terms of the Xxxxx Xxxxxxxxx Plan, except
of course for the calculation of the amount of severance pay. Under that Plan,
the total severance payment would be made to you in installments, at the same
time and in the same manner as salary continuation payments, over a period of 18
months beginning as of the date you are terminated. However, at your option,
under the current terms of the Xxxxx Xxxxxxxxx Plan, the entire severance
payment may be paid to you in a single lump sum as soon as practical after your
termination. Notwithstanding the foregoing, any election to receive such
payments, as well as the timing of those payments, must comply with the American
Jobs Creation Act of 2004 (and all other applicable law).
You will not, in any event, however, be entitled to the severance payment
described above if, at the time your employment terminates, your employment
terminates as the result of your death, or you are entitled to payments under
your Executive Severance Agreement
Xxxxxxx X. Xxxxx 4/28/2005 Page 4
--------------------------------------------------------------------------------
described above, or to disability income payments under the Grace "LTD Plan"
and/or "ESP Plan" mentioned below.
Also, if you receive a severance payment under this offer, you will not be
entitled to any other severance pay from the Company.
SIGN-ON BONUS
As consideration for the unvested, "in-the-money" stock options and the
near-term unvested restricted stock units you will "walk away" from at your
previous employer, the Company will pay you a sign-on bonus of $350,000 on May
12, 2005 (which is the first regular Company pay date immediately following your
employment start date of May 1, 2005), subject to the repayment provisions
specified in the next sentence. You agree to re-pay to the Company the full
amount of this bonus if you terminate your employment with the Company within
the first 12 months of your employment; i.e., anytime prior to May 1, 2006. In
that event, such repayment must be made in full, no later than your last day of
active employment with the Company.
SPECIAL SUPPLEMENTAL RETIREMENT PAYMENT ARRANGEMENT
Management will recommend that the Board approve a special retirement
arrangement to recognize, in part, your service with your prior employer and to
provide you with meaningful mid-career accrual of retirement benefits. Under the
circumstances described below, the Company will provide you with 10 additional
years of credited service in determining your total retirement benefits from the
Company. The benefit associated with those additional years would be calculated
and administered as if that additional benefit would be payable under the X. X.
Xxxxx & Co. Retirement Plan for Salaried Employees and the Grace Supplemental
Executive Retirement Plan ("SERP").
On the first, second, third and fourth anniversary dates of your employment,
i.e., on May 1, 2006, 2007, 2008 and 2009, you will be credited with an
additional year of credited service, provided you are still an employee of the
Company on such dates. On the fifth anniversary of your date of employment,
i.e., on May 1, 2010, you will be credited with an additional 6 years of
credited service so that your total retirement benefit on that date would be
based on 15 years of credited service, provided you are still an employee of the
Company on that date. After that date, credited service would accrue each year
under the Grace Retirement Plan and SERP only, in accordance with the applicable
terms of those Plans. For example, based on the current provisions of those
Plans, after 1, 2, 3, 4 and 5 years of service with Grace, your total retirement
benefit would be based upon 2, 4, 6, 8 and 15 years of credited service.
Notwithstanding the foregoing, if you are terminated by the Company without
"Cause" (as defined above) prior to such anniversary (i.e., prior to May 1,
2010), including termination without "Cause" following a change-in-control of
the Company, you will receive a number of years of additional credited service
under this special supplemental retirement payment arrangement equal to the
result of the following calculation:
10 years x your full and partial years of service with Grace
--------------------------------------------------
5
Xxxxxxx X. Xxxxx 4/28/2005 Page 5
--------------------------------------------------------------------------------
This supplemental retirement payment would not be offset by any benefits payable
to you from your previous employer and would be payable from the general assets
of the Company - it would not be pre-funded in any manner.
If the Grace Salaried Retirement Plan is amended in a manner that affects the
calculation of benefits, while you are employed by the Company, then your
supplemental retirement payment may be adjusted in a equitable manner consistent
with such amendment. Any such adjustment will be determined by the actuary for
the Salaried Retirement Plan; but such adjustment may not in any event decrease
your supplemental retirement payment below an amount that would be calculated
based on your years of service and "final average compensation" as of the day
before the effective date of such amendment.
OTHER BENEFIT PROGRAMS
As an officer of the Company, you will also be eligible to participate in the
following benefit plans and programs (subject to the continuation and the actual
provisions of the plans and programs, as amended from time to time):
o The X. X. Xxxxx & Co. Retirement Plan for Salaried Employees ("Grace
Salaried Retirement Plan")
o The X. X. Xxxxx & Co. Supplemental Executive Retirement Plan
o The X. X. Xxxxx & Co. Salaried Employee Savings & Investment Plan
o The X. X. Xxxxx & Co. Savings & Investment Plan Replacement Payment
Program
o The X. X. Xxxxx & Co. Long-Term Disability Income Plan ("LTD Plan")
o Executive Salary Protection Plan ("ESP Plan")
o The X. X. Xxxxx & Co. Voluntary Group Accident Insurance Plan
o The X. X. Xxxxx & Co. Business Travel Accident Insurance Plan
o The X. X. Xxxxx & Co. Group Term Life Insurance Program
o Personal Excess Liability Insurance
o The X. X. Xxxxx & Co. Group Medical Plan
o The X. X. Xxxxx & Co. Dental Plan
o Retiree Medical Coverage
In addition, during your employment with the Company, you shall also be entitled
to participate in all other employee/executive perquisites, pension and welfare
benefit plans and programs made available to the Company's executives or to its
employees generally, as such plans or programs may be in effect, and amended,
from time to time.
FINANCIAL COUNSELING PROGRAM
As an officer of the Company, you will be eligible to participate in the
Company's Financial Counseling Program. This Program provides you with financial
and estate planning and income tax preparation assistance. The Company will pay
up to $4,000 per calendar year for reasonable, supportable expenses, except that
the maximum amount for the first year of your participation will be $9,000.
Xxxxxxx X. Xxxxx 4/28/2005 Page 6
--------------------------------------------------------------------------------
EXECUTIVE PHYSICAL PROGRAM
As an officer of the Company, you will be eligible to receive a Company-paid
annual executive physical examination. The Company has made arrangements at
leading healthcare facilities for this purpose and you should schedule your
examination through the Company's Medical Director.
VACATION
As an officer of the Company, you will be entitled to four weeks paid vacation
per full calendar year.
INDEMNIFICATION
The Company shall, to the extent permitted by applicable law, indemnify you and
hold you harmless from and against any and all losses and liabilities you may
incur as a result of your performance of your duties as an officer or employee
of the Company. In addition, the Company shall indemnify and hold you harmless
against any and all losses and liabilities that you may incur, directly or
indirectly, as a result of any third party claims brought against you (other
than by any taxing authority) with respect to the Company's performance of (or
failure to perform) any commitment made to you under this agreement. The Company
shall obtain such policy or policies of insurance as it reasonably may deem
appropriate to effect this indemnification.
RELOCATION
You will be entitled to receive principal residence relocation assistance under
the Company's relocation policy applicable to the relocation of active
employees.
CONFIDENTIALITY AND NON-COMPETE AGREEMENTS
As a condition of employment, you will be required to sign the Company's
standard employment agreement (the "Standard Agreement"--copy attached), which
includes agreements regarding the confidentiality of Company information and
non-competition, and similar provisions. To the extent that the terms the
Standard Agreement differ from the terms of this letter agreement, the terms of
this letter agreement (and not the Standard Agreement) shall control your
employment relationship with the Company. In addition, the provisions of item 5
of the Standard Agreement are not applicable to the terms of this letter
agreement, in that the Standard Agreement does not supercede any terms of this
agreement.
MISCELLANEOUS
You and the Company acknowledge this letter agreement, and the other written
agreements referred to herein, contain the entire understanding of the parties
concerning the subject matter hereof. You and the Company acknowledge that this
agreement supersedes any prior agreement between you and the Company concerning
the subject matter hereof. Except as expressly otherwise provided herein, this
agreement shall not adversely affect your right to participate in, or receive
any benefit under, any incentive, severance or other benefit plan or program in
which you may from time to time participate.
Xxxxxxx X. Xxxxx 4/28/2005 Page 7
--------------------------------------------------------------------------------
If any provision of this agreement is held invalid or unenforceable in whole or
in part, such provision, to the extent it is invalid or unenforceable, shall be
revised to the extent necessary to make the provision, or part hereof, valid and
enforceable, consistent with the intentions of the parties hereto. Any provision
of this agreement that is held invalid or unenforceable, in whole or in part,
shall not affect the validity and enforceability of the other provision of this
agreement, which shall remain in full force and effect.
This letter agreement may be amended, superseded or canceled only by a written
instrument specifically stating that it amends, supersedes or cancels this
letter, executed by you and the Company.
If you have any questions regarding any expectations of your new position,
please call me.
Xxxx, again, we are very excited about your decision to join Grace and look
forward to a productive and rewarding relationship.
Sincerely,
Xxxxxx X. Xxxxx
President & Chief Operating Officer
X. X. Xxxxx & Co.
Attachment
cc: X. X. XxXxxxx
M. N. Xxxxxxxxxx
AGREED AND ACCEPTED:
------------------------
Xxxxxxx X. Xxxxx
------------------------
Date
