Xxxx X. Xxxxxx
Chairman, President & CEO
Corporate Headquarters
[GRACE LOGO]
X. X. Xxxxx & Co.
0000 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
(000) 000-0000
Fax: (000) 000-0000
May 6, 1999
Xx. Xxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Dear Bob,
This letter agreement specifies the terms of your employment with X. X. Xxxxx &
Co. (the "Company") as Senior Vice President & Chief Financial Officer
(collectively, the "CFO"), which will be presented for approval to the Company's
Board of Directors (the "Board") and/or the Compensation Committee of the Board,
as applicable, on May 11, 1999. The Board is extremely pleased that you will be
joining the Company and believes 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 of
this letter is also enclosed for your records.
RESPONSIBILITIES
Your employment with the Company is subject to Board approval and will begin as
of May 11, 1999. Your title will be "Senior Vice President & Chief Financial
Officer" of the Company, and you will report to me.
Your principal obligations, duties and responsibilities will be those generally
inherent in the office and title of CFO. Your office will be located at the
Company's Headquarters in Columbia, Maryland.
TERM OF AGREEMENT
The term of your employment under this agreement will be for a period of three
and one half years, beginning on the date your employment with the Company
commences, May 11, 1999 and ending on November 10, 2002 (such period is referred
to in this agreement as your "Employment Term").
If your employment as CFO of the Company (or in another position acceptable to
you) continues after the Employment Term, and no other contrary arrangements
have been mutually agreed in writing between you and the Board, then the
arrangements described in this agreement will be discontinued and you will be an
employee of the Company "at will" subject to the same requirements as similarly
situated employees of the Company at that
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time, except as provided under the following sections entitled "Severance Pay
Arrangement" and "Special Supplemental Retirement Payment Arrangement".
COMPENSATION
1. Your initial annual base salary as CFO will be $350,000.00. Thereafter,
your base salary will be subject to periodic reviews on the same basis and
at the same intervals as are applicable to other senior officers of the
Company.
Your salary will cease to accrue immediately upon your termination of
employment with the Company, whether you voluntarily cease performing
services or otherwise. (Note, however, the provisions below under
"Severance Pay Arrangement".)
2. You will be eligible to participate in the Company's Annual Incentive
Compensation Program. Cash awards under this Program are contingent upon
individual performance, and will be determined by the financial results of
the Company as a whole. As CFO, under the current provisions of the
Program, you will be eligible for a targeted award of 45% of your annual
base salary with a maximum available award of 200% of the target; however,
your actual award for 1999 will be no less than $129,000. All annual
incentive compensation awards are subject to approval by the Compensation
Committee and the Board and will be contingent upon your remaining with
the Company through the date of payment (except with respect to the
special provision for the 1999 award described in this paragraph).
However, the payment for 1999 described above will be made in March 2000
(reduced, if applicable, on a prorated basis to exclude any duplicate
payments that may be payable to you under your severance arrangement) even
in the event your employment is terminated by the Company without "Cause"
before the date of payment, including termination of employment without
"Cause" following a change-in-control of the Company. You will not,
however, be entitled to that payment if you voluntarily resign, or are
terminated for "Cause", prior to March 2000.
3. Management will recommend that you be granted a stock option on May 11,
1999, covering 100,000 shares of Grace Common Stock at the "Fair Market
Value" on such date, which will vest in three share installments of
33,333, 33,333 and 33,334 on May 12, 2000, 2001 and 2002, respectively;
provided, however, all such installments would vest immediately upon
termination of employment by the Company without "Cause" including
termination of employment without "Cause" following a change-in-control of
the Company. The stock option will be granted under the Company's 1998
Stock Incentive Plan, which will govern the terms of that option, except
as otherwise provided by this letter agreement.
You will be eligible to receive periodic stock option grants in the future
at the same times as other senior officers, and covering a number of
shares consistent with your position as a senior officer of the Company.
4. Consistent with your election as an officer of the Company, the Board will
be requested to authorize the Company to enter into an Executive Severance
Agreement or a so-called "golden parachute" with you. In general, the
terms of that agreement would provide for a severance payment of 3 times
the sum of your annual base salary
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plus your targeted annual incentive compensation award, 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 for definition of "change in
control", "employment termination" and other particulars of this
arrangement.
SEVERANCE PAY ARRANGEMENT
If your employment is terminated by the Company without "Cause" during your
Employment Term, you will be entitled to the severance payment described in the
next sentence. The severance payment will be 2 times a dollar amount equal to
145% of your annual base salary at the time your employment is terminated. The
severance payment may be made to you in installments, at the same time and in
the same manner as salary continuation payments, over a period of two years
beginning as of the date you are terminated. However, at your option, the entire
severance payment may be paid to you in a single lump-sum as soon as practical
after your termination (if approved by the Compensation Committee).
The definition of "terminated by the Company without cause" shall mean: (i)
termination for reasons other than death or total disability or cause, or (ii)
resignation by you due to a significant change in the nature or scope of your
authorities or duties from those embodied in the role of CFO, or (iii)
resignation by you in response to a reduction in total compensation from that
provided in this agreement, or (iv) resignation by you in response to an
adjudicated breach by the Company of any provision of this agreement.
On the date your Employment Term expires (i.e., November 10, 2002), this
severance pay arrangement will no longer be applicable to you, and your
continued employment with the Company will be as an employee "at will",
provided, however, you will, as of the day immediately after that date, become
entitled to a severance payment of 1 times a dollar amount equal to 145% of your
annual base salary, if you are terminated by the Company without "Cause", at any
time after November 10, 2002.
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 described above, or to disability income
payments under the Grace "LTD Plan" and/or "ESP Plan" described below.
Also, if you receive a severance payment under this agreement, you will not be
entitled to any other severance pay from 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 prior employers and to
provide you with meaningful mid-career accrual of retirement benefits. As
described below, the Company will provide you with additional years of credited
service, with a maximum of 10 additional years, in
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determining your total retirement benefits from the Company. The benefit
associated with those additional years would be calculated as if that additional
benefit would be payable under the X. X. Xxxxx & Co. Retirement Plan for
Salaried Employees and the Supplemental Executive Retirement Plan ("SERP")
formulas (as described in items 2 and 3 below).
Basically, the additional service would be credited to you as follows:
1. You would be credited with a minimum of 5 years of credited service on
your date of employment.
2. Following your date of employment, you will be credited with an additional
year of credited service under this supplemental arrangement for each year
of credited service you earn under the Grace Salaried Retirement and
Supplemental Executive Retirement Plans.
For example, if you were employed for 2 years after your date of
employment, your total retirement benefit (i.e., from the plans plus the
supplemental arrangement) would be based on the minimum of 5 years of
credited service since your accumulated service (i.e., service under the
plans plus under the supplemental arrangement) would be less than the
minimum. If you were employed for 4 years, you would receive a total
retirement benefit based on 8 years of credited service since your
credited service under the plans and the supplemental arrangement would
exceed the minimum number (i.e., 5). After 6 years, your total retirement
benefit would be based on 12 years of credited service; and if you were
employed for 10 years, your total retirement benefit would be based on 20
years of credited service.
3. After 10 years of employment with the Company, credited service would
accrue each year under the Grace Retirement and Supplemental Retirement
Plans only, because you would already have been credited with the maximum
number of additional years of credited service under the supplemental
arrangement - 10. For example, after 11 years of service with the Company,
your total retirement benefit would be based on 21 years of credited
service.
The supplemental retirement payment would not be offset by any benefits payable
to you from any of your previous employers, and would be payable from the
general assets of the Company -- it would not be pre-funded in any manner.
This supplemental retirement arrangement would apply only if your employment
with the Company ceases on or after the date your Employment Term expires (i.e.,
November 10, 2002), or if you are terminated during that Term, without "Cause",
including termination without "Cause" following a change-in-control of the
Company. However, in any event, this arrangement would not be applicable if you
voluntary terminate your employment before your Employment Term expires, or if
you are terminated for "Cause" prior to the expiration of that Term. In the
event of your death while you are entitled to a supplemental benefit, that
benefit will be payable as governed by the terms of the Salaried Retirement Plan
and the Supplemental Retirement Plan.
For purposes of determining any supplemental retirement benefit that may be
payable to you, if you leave the Company after the expiration of your Employment
Term or you are terminated by the Company without "Cause", your "final average
compensation" will be
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determined in accordance with the formula provided under the basic Salaried
Retirement Plan, i.e., your final average compensation would be determined by
the number of months you are employed if less than 60 months.
Note, 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 this
supplemental retirement payment may be adjusted in an 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.
DEFINITION OF CAUSE
"Cause", for purposes of this 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 significant misconduct, which has had or will
have a direct material adverse effect upon the business affairs,
properties, operations or results of operations or financial condition of
Company,
(ii) Refusal or failure of you to comply with the mandates of the Board, or
failure by you to substantially perform your duties hereunder, 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) 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.
OTHER BENEFIT PROGRAMS
As a senior officer of the Company, you will also be eligible to participate in
the following benefit plans and programs (subject to the actual provisions of
the plans and programs, and as amended from time to time):
1. The Grace Deferred Compensation Program provides that you may elect to
defer a portion of your base salary (from a minimum of $200 per month to a
maximum of 25% of base salary) and all or a portion of your annual
incentive compensation. Deferred amounts are credited with interest equal
to the greater of (i) the prime rate plus 2 percentage points or (ii) 120%
of the prime rate.
2. The X. X. Xxxxx & Co. Retirement Plan for Salaried Employees ("Grace
Salaried Retirement Plan") is a "tax qualified" plan that provides a
pension at retirement equal to 1.50% of final average compensation (as
defined by the Plan, which includes annual base salary and annual
incentive compensation in the sixty (60) consecutive highest-paid months
during the last 180 months of employment), less 1.25% of the primary
Social Security benefit, multiplied by years of credited service.
Participation in
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this Plan is effective the beginning of the month following one (1) year
of employment with credited service retroactive to the first of the month
beginning on or following the date of hire. A participant becomes 100%
vested upon the earlier of (1) reaching five years of service or (2)
attaining age 55.
3. The X. X. Xxxxx & Co. Supplemental Executive Retirement Plan ("SERP") is
an unfunded Company plan that supplements benefits under the Grace
Salaried Retirement Plan. The SERP pays retirement benefits which would
otherwise be paid under the terms of the Salaried Retirement Plan, but for
limits and exclusions imposed by tax law. For example, pension benefits
related to base salary or incentive compensation awards, which an
executive elects to defer, will be paid under the provisions of the SERP
(not the Grace Salaried Retirement Plan). The SERP also pays any pension
benefits that an executive accrues in excess of the "tax qualified" plan
limits (currently $130,000 per year) and compensation limit (currently
$160,000 per year). Participation, vesting and payment options in the SERP
follow the same rules as the Grace Salaried Retirement Plan.
4. The X. X. Xxxxx & Co. Salaried Employee Savings & Investment Plan ("S&I
Plan"). At the beginning of the month following one (1) year of
employment, the S&I Plan permits you to save a portion of your
compensation up to a maximum permitted by law by contributing such amount
to the Plan by payroll deduction. With respect to the first 6% you
contribute, the Company will match $1 of Grace stock for each $2 you save.
Your contributions are invested in one or more of seven funds at your
option. Xxxxx's S&I Plan is a so-called "401(k) plan" and, therefore, a
portion of your contribution can, at your election, be treated as deferred
income for tax purposes. Amounts of allowable contributions are subject to
certain Internal Revenue Code limits, one of which limits annual
before-tax savings amounts (for 1999, this limit is $10,000). The S&I Plan
currently permits an 8% maximum savings rate for before-tax amounts.
5. The X. X. Xxxxx & Co. Savings & Investment Plan Replacement Payment
Program is designed to "make-up" matching Company contributions that are
not paid due to the compensation threshold limit under the Internal
Revenue Code. To be eligible to receive a "make-up" payment each year, an
executive must participate in the S&I Plan at a rate of at least 6% during
the entire year until he or she reaches the compensation limit. The
replacement payment then equals 3% of the year's plan compensation in
excess of the legally-imposed compensation limit (which is $160,000 for
1999).
You may elect to receive your replacement payment by check at the time
annual incentive compensation awards are paid or credited (which is
currently in March of the year following the year to which the payment
relates), or you may elect to defer the replacement payment you would
otherwise receive. If you choose to defer the payment, you will receive
earnings credited under the Deferred Compensation Program.
6. The X. X. Xxxxx & Co. Long-Term Disability Income Plan ("LTD Plan"). You
will become eligible to participate in the LTD Plan on a voluntary and
contributory basis on the first of the month following or coincident with
your date of employment. Generally, the LTD Plan provides for a monthly
income of 60% of base monthly
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earnings should you become disabled, within the meaning of the Plan. The
maximum monthly benefit under the Plan is $30,000.
7. Executive Salary Protection Plan ("ESP Plan"). Consistent with your status
as a senior officer of the Company, beginning with the first date of your
employment with the Company, you will commence participation in the ESP
Plan. Under the ESP Plan, in the event of your death while employed by the
Company and prior to age 70, the Company will continue to pay a portion of
your base salary to your beneficiary(ies) for a period of time depending
upon your age at death. This Plan also provides certain disability
benefits which are supplemental to the Company's LTD Plan.
8. The X. X. Xxxxx & Co. Voluntary Group Accident Insurance Plan. You will
become eligible to participate in this Plan effective on the first date of
employment. Participation is voluntary and requires employee
contributions. Under the terms of the Plan, you may elect coverage of
$10,000 through $500,000. Coverage is available on an individual basis or
under a family plan.
9. The X. X. Xxxxx & Co. Business Travel Accident Insurance Plan. You will
become a participant in this Plan effective on the first date of your
employment with the Company. The Plan provides protection against death,
permanent total disability or dismemberment. The principal sum is 5 times
your annual base salary (with a maximum principal sum of $1,500,000). In
your case, as in the case of other executives, the usual requirements that
you be away from home or normal place of work and that you be on Company
business do not apply in order to be eligible for coverage.
10. The X. X. Xxxxx & Co. Group Term Life Insurance Program. You will
participate in the Company's basic group term life insurance plan under
which coverage is 1.5 times your annual base salary.
Supplemental life insurance coverage, which is voluntary, is also
available at moderate rates based on your age, up to an additional 3 times
your annual base salary (with a maximum of $1,500,000 of supplemental
coverage). Dependent life insurance is also available to your spouse and
unmarried dependent children to age 19 (or to age 23 if the child
regularly attends school full-time).
11. Personal Excess Liability Insurance is effective on the first day of
employment, as an officer of the Company, for a $6,000,000 limit of
liability. Coverage is for personal liability claims made against you or a
family member for bodily injury, property damage, and personal injury. The
policy extends liability coverage over and above what is covered by the
primary underlying liability coverage contained in your homeowners,
automobile, watercraft and recreational vehicle insurance policies.
12. The X. X. Xxxxx & Co. Group Medical Plan is effective on the first day of
employment and offers protection to you, your spouse and unmarried
children to age 19 (age 23 if the child regularly attends a qualified
school on a full-time basis). The Baltimore/ Washington network medical
plan utilizes an established network of doctors and hospitals in the area.
Employees have a choice of two different plan options and a total of four
different providers of coverage. The Point of Service (POS) option allows
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you the choice to use a network provider or the freedom to go outside the
network for medical care; an HMO option requires that you use network
providers only. The POS option is provided by Aetna U.S. Healthcare and
the three local HMO options are provided by Freestate Health Plans, M.D.
IPA and Xxxxxx Permanente. Employees and their family members must choose
a primary care physician who will oversee all of their medical needs. Your
cost for participation in 1999 and hereafter, under the current plan
provisions, will be 40% of the monthly premium.
You will also have the opportunity to contribute to a flexible spending
account up to $5,000 per year.
An employee hired after January 1, 1993, qualifies for post-retirement
medical coverage if he or she has at least 10 years of service at
retirement (age 55 or later). Qualification for this coverage gives the
retiree access to medical coverage in the Grace plan, but the retiree is
expected to pay 100% of the premium cost of this coverage. Premium cost is
determined annually based on experience. Actual claims dollars are paid by
the Company.
13. The X. X. Xxxxx & Co. Dental Plan is fully paid for by the Company and
provides coverage for you and your eligible family members from on the
first day of employment. Benefits under the plan reflect whether dental
services are obtained from an in-network or out-of-network provider.
14. Executive Registry Program. Under this Program you will have access to a
network of medical services offered by leading hospitals and medical
centers in large cities throughout the U.S. and abroad. These hospitals
and medical centers serve as sources where members can obtain high-quality
emergency medical care while traveling or temporarily living away from
home either in the U.S. or abroad.
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.
COMPANY CAR
The Company will arrange for you to lease, at the Company's expense, an
automobile for use on Company business and for your personal use. The terms of
the coverage will be the same as those provided for other officers of the
Company, including a purchase price cap of $35,000.
EXECUTIVE PHYSICAL PROGRAM
As an officer of the Company, you will be eligible to receive a Company-paid
annual executive physical examination.
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VACATION
As an officer of Grace, you will be entitled to four weeks paid vacation per
full calendar year during your Employment Term.
INDEMNIFICATION COMMITMENT
The Company shall, to the extent permitted by applicable law, indemnify you and
hold you harmless from and against any liability you may incur as a result of
your performance of duties hereunder in accordance with the provisions of this
agreement. The Company shall obtain such policy or policies of insurance as it
may deem appropriate to effect this indemnification.
MISCELLANEOUS
This Agreement may be amended, superseded or canceled only by a written
instrument specifically stating that it amends, supersedes or cancels this
Agreement, executed by you and the Company.
You and the Company acknowledge that this agreement supersedes any other
agreement between you and the Company concerning the subject matter hereof.
If you have any questions regarding any expectations of your new position,
please call me.
If you have any questions regarding the compensation and Company benefit plans
and programs, please feel free to call Xxxx Xxxxxx, Vice President, Human
Resources, at (000) 000-0000.
Bob, we are very excited about your joining the Grace organization and look
forward to a productive and mutually rewarding relationship.
Sincerely,
Xxxx X. Xxxxxx
Chairman, President
& Chief Executive Officer
Attachment
cc: X. X. XxXxxxx
X. X. Xxxxxx
M. N. Xxxxxxxxxx
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AGREED AND ACCEPTED:
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Xxxxxx X. Xxxxxx
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Date
