EXHIBIT 10.27
XXXX X. XXXXXX
Chairman & Chief Executive Officer
X. X. Xxxxx & Co.
0000 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
(000) 000-0000
Fax: (000) 000-0000
email xxxx.x.xxxxxx@xxxxx.xxx
[XXXXX LOGO]
January 19, 2005
Xx. Xxxxxx X. Xxxxx
00000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Dear Xxxx:
The Board of Directors has approved this letter agreement which specifies the
terms of your continued employment with X. X. Xxxxx & Co. (the "Company"). You
will assume the position of Chief Executive Officer of the Company, effective
June 1, 2005, in conjunction with my retirement from the Company effective the
day before that date (i.e., effective May 31, 2005). Thus, as of June 1, 2005,
you will be Chief Executive Officer and President of the Company (collectively,
the "CEO").
Also, as discussed, I will continue as Chairman of the Board of Directors of the
Company (the "Board") after my retirement, and, as agreed with the Board, will
provide consulting services related to the Company's Chapter 11 cases and other
matters.
As you know, the provisions of this letter agreement were previously approved by
the Board and the Compensation Committee of the Board. In addition, this letter
agreement will be submitted to the U. S. Bankruptcy Court with jurisdiction over
the Company's Chapter 11 cases.
Xxxx, I am extremely pleased that you have agreed to assume the position of CEO,
and we are confident that you will continue to make valuable contributions to
the success of the Company in your new position.
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
You will assume the position as CEO of the Company on June 1, 2005. (As all
other Company Headquarters employees, you will continue to be employed by X. X.
Xxxxx & Co.-Conn., but will be CEO of both X. X. Xxxxx & Co. and X. X. Xxxxx &
Co.-Conn.) As of that date, your title will be "Chief Executive Officer and
President" of the Company, and you will report directly to the Board.
Xxxxxx X. Xxxxx January 19, 2005 Page 2
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Your principal obligations, duties and responsibilities will be those generally
inherent in the office and title of CEO. Your office will continue to be located
at the Company's Headquarters in Columbia, Maryland.
EFFECTIVE DATE AND STATUS OF PRIOR AGREEMENT
Subject to Bankruptcy Court approval, this letter agreement shall be effective
as of June 1, 2005. Any other provision of this agreement notwithstanding,
should you cease to be an employee of the Company for any reason before that
date, you shall not become the CEO of the Company, and the provisions of this
letter agreement shall become void as of the date that your employment with the
Company ceases, which means that neither you nor the Company (nor any other
party) shall have any rights or obligations under this agreement, in that case.
As of the date you assume the position of CEO, your prior agreement with the
Company, dated November 17, 2003, shall become void, which means that neither
you nor the Company (nor any other party) will retain any rights or obligations
thereunder, as of that date. The rights and obligations related to your
employment with the Company as CEO on and after that date shall be governed by
the terms of this letter agreement (including any written amendments to this
agreement).
TERM OF AGREEMENT
The term of your employment as CEO under this letter agreement will be for a
period of four years, beginning on the date you assume that position, June 1,
2005, and ending on May 31, 2009 (such period is referred to in this agreement
as your "Initial CEO Employment Term").
If your employment as CEO of the Company (or in any other position) continues
after the Initial CEO 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 time, except as provided under the following
section entitled "Severance Pay Arrangement".
COMPENSATION
1. Your initial annual base salary as CEO will be $760,000.00. 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, even if your termination occurs during your
Initial CEO Employment Term and whether or not your termination is
voluntary. (Note, however, the provisions under "Severance Pay
Arrangement.")
2. As CEO, you will, of course, continue to be eligible to participate in the
Company's Annual Incentive Compensation Program. For 2005, your targeted
award under the Program will be 100% of your base salary earned during the
applicable calendar year. For 2006 and thereafter, your targeted award will
continue to be 100% (or greater, as determined by the Board) of your annual
base salary earned during the applicable calendar year. Any payments to you
under the Program will be made at the same
Xxxxxx X. Xxxxx January 19, 2005 Page 3
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time and in the same manner as payments to other participants in the
Program. Under the Program, awards for a calendar year are generally paid
during March of the following calendar year Awards under this Program are
subject to Board approval and are contingent upon individual performance
and financial results of the Company. 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 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. 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 next sentence. Notwithstanding the
prior provisions of this paragraph, if your employment is terminated by the
Company without "Cause" (as defined below) or by you as a result of
"Constructive Discharge" (as defined below) after the Company emerges from
Chapter 11 but during your Initial CEO Employment Term, or as a result of
your death or because you become entitled to disability income payments
under the "Grace LTD Plan" and/or the "ESP Plan" (mentioned below) at any
time during your Initial CEO Employment Term, then you (or your
beneficiary, if applicable) will be entitled to a pro-rated award under the
Program for the calendar year of your last day of employment with the
Company. In that event, your pro-rated award for that calendar year will be
calculated as follows: the amount you would have otherwise been awarded
under the Program for that calendar year (but for your termination),
calculated based solely on the applicable financial results of the Company
for that calendar year, multiplied by the fraction whereby the numerator is
the number of days that you were an active employee of the Company during
that calendar year and the denominator is 365. The actual payment under the
Program for that calendar year shall be made to you at the same time and in
the same manner as payments are made to other Program participants (who
were not terminated prior to the payment date) for that calendar year.
3. You also will be eligible for a targeted award under the Company's
Long-Term Incentive Plan (the "LTIP") for the 2005 - 2007 performance
period in the amount of $1,690,000; or an equivalent value comprised of
stock options or other equity and/or cash targets, as provided under the
terms of that LTIP. The terms of your award under that LTIP, and your
awards under all other 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; except as specified in the next sentence. Notwithstanding the
prior provisions of this paragraph, if your employment is terminated by the
Company without "Cause" (as defined below) or by you as a result of
"Constructive Discharge" (as defined below) after the Company emerges from
Chapter 11 but during your Initial CEO Employment Term, or as a result of
your death or because you become entitled to disability income payments
under the "Grace LTD Plan" and/or the "ESP Plan" (mentioned below) at any
time during your Initial CEO Employment Term, then you will be entitled to
a pro-rated award under each LTIP in which you participated prior to your
termination. In that event, your pro-rated award under each such LTIP will
be calculated as follows: the amount you would have otherwise been entitled
to under the LTIP (but for your termination), multiplied by the fraction
whereby the numerator is the number of days that you were an active
employee of the Company during the performance period of
Xxxxxx X. Xxxxx January 19, 2005 Page 4
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the LTIP and the denominator is the total number of days of during such
performance period. Each payment under each such LTIP shall be made to you
at the same time and in the same manner as payments are made to other LTIP
participants who were not terminated prior to the payment date.
4. The Executive Severance Agreement you entered into with the Company upon
your initial election as an officer will remain in effect during your term
as CEO, subject to the actual terms of that agreement (including the
Board's right to terminate that agreement in accordance with the procedures
described therein). In general, the terms of that agreement would provide
for a severance payment of 3 times the sum of your annual base salary 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.
SEVERANCE PAY ARRANGEMENT
If your employment is terminated by the Company without "Cause" (as defined
below) or by you as a result of "Constructive Discharge" (as defined below),
during your Initial CEO 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 175% 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 24 months 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). In all other respects, your severance
pay arrangement shall be governed by the terms of the X. X. Xxxxx & Co.
Xxxxxxxxx Pay Plan for Salaried Employees. 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 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 letter agreement, you will
not be entitled to any other severance pay from the Company.
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 Company,
Xxxxxx X. Xxxxx January 19, 2005 Page 5
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(ii) Refusal or failure of you to comply with the mandates of the Board (unless
any such mandates by the Board constitute Constructive Discharge, and you
have determined to terminate your employment as a result thereof), or
failure by you to substantially perform your duties as CEO, 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.
DEFINITION OF CONSTRUCTIVE DISCHARGE
"Constructive Discharge," for purposes of this letter agreement, means the
occurrence of any of the following without your prior written consent:
(i) any demotion from the position as CEO of the Company (provided that this
provision shall not apply if you agree that any other individual should be
elected as President and/or Chief Operating Officer of the Company);
(ii) the relocation of your principle office to a location more than 35 miles
away from the current site of the Company's Headquarters in Columbia,
Maryland, without your prior consent;
(iii) any material diminution in your level of authority from that of CEO or any
assignment to you of any duties that are not consistent with the position
of CEO; other than authority or duties that (a) may be appropriate to
another position with the Company that you hold in addition to the position
of CEO, (b) result from any requirement or request from the Board that is
reasonably related to your position as CEO (or any other position you may
hold with the Company at the time you retain your position as CEO), or (c)
results from an inadvertent failure or oversight of the Board that is
remedied within 30 days after your written notice thereof has been received
by the Chairman of the Compensation Committee of the Company's Board of
Directors;
(iv) the Company imposes upon you compensation arrangements that do not comply
with this letter agreement; or
(v) any material breach of this letter agreement by the Company.
Notwithstanding the foregoing:
o any termination of employment by you will not be deemed to be a termination
as a result of Constructive Discharge, unless (i) you provide to the
Chairman of the Compensation Committee written notice of your decision to
terminate your employment that sets forth in reasonable detail the specific
conduct or occurrence that you deem constitutes Constructive Discharge and
the specific provision of this letter agreement upon which you rely and
(ii) the Company does not cure such conduct or occurrence within 30 days
after such notice has been received by the Chairman of the Compensation
Committee;
Xxxxxx X. Xxxxx January 19, 2005 Page 6
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o your right to terminate your employment on the basis of Constructive
Discharge shall be deemed waived by you if you do not provide such notice
to the Chairman of the Compensation Committee within 60 days after you
become aware of all material facts regarding the conduct or occurrence that
you deem constitutes Constructive Discharge.
CHAPTER 11 EMERGENCE BONUS
You will be paid a "Chapter 11 emergence bonus," as specified by this paragraph
(your "Emergence Bonus"). The total amount of your Emergence Bonus will be
$1,750,000 -- $750,000 of that amount will be paid 6 months after the Company
emerges from Chapter 11, and the remaining $1,000,000 will be paid to you 18
months after such emergence; or, if the Company does not emerge from Chapter 11
within 36 months of it (or another party) filing an initial plan of
reorganization with the Bankruptcy Court, you will instead be paid your
Emergence Bonus as follows: $750,000 will be paid 36 months after the filing of
an initial plan of reorganization with the Court, and $1,000,000 will be paid 48
months after such filing (even if the Company emerges from Chapter 11 after such
36 month, but before such 48 month, period).
Notwithstanding the foregoing, you shall not be entitled to any payment
described in the immediate prior paragraph, if you are not employed by the
Company as of the date the payment is scheduled to be made as described above;
except as specified in the next sentence. Notwithstanding the prior provisions
of this paragraph, if your employment is terminated by the Company without
"Cause" (as defined above) or by you as a result of "Constructive Discharge" (as
defined above) or as a result of your death (or because you become entitled to
disability income payments under the "Grace LTD Plan" and/or the "ESP Plan"
mentioned below), and such event occurs after the Company emerges from Chapter
11 but before you actually receive all payments of your Emergence Bonus, then
you (or your beneficiary, if applicable)will be paid the total remaining, unpaid
amount of your Emergence Bonus no later than 30 days after your last date of
employment with the Company.
OTHER BENEFIT PROGRAMS
As a senior officer of the Company, you will also continue to 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
Xxxxxx X. Xxxxx January 19, 2005 Page 7
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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 senior level
executives or to its employees generally, as such plans or programs may be in
effect, and amended, from time to time.
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 a director, 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; provided, however, that in no event
shall the Company modify its insurance coverage with respect to you in a manner
that renders such coverage less favorable to you than that in force as of the
date of this letter agreement.
DISPUTE RESOLUTION
Any dispute, controversy or claim arising out of or relating to this letter
agreement, or a breach thereof, shall be settled by arbitration in accordance
with the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association as such rules are in effect on the date of the
delivery of a demand for arbitration (the "National Resolution Rules"), which
shall be effectuated by the demanding party providing notice to the other party
in accordance with the provisions below under the heading "Notices". The parties
expressly acknowledge that they are waiving their rights to seek remedies in
court, including without limitation the right (if any) to a jury trial.
There shall be one arbitrator, to be selected under the National Resolution
Rules.
The decision of the arbitrator shall be final and binding on the parties and
their respective heirs, executors, administrators, personal representatives,
successors and assigns. Judgment upon any award of the arbitrator may be entered
in any court of competent jurisdiction, or application may be made to any such
court for the judicial acceptance of the award and for an order of enforcement.
AIR TRAVEL
In addition to the usual Company policies regarding air travel by senior
officers on Company business, the Company will provide you with travel by
chartered aircraft or with travel on an aircraft fractionally owned by the
Company, at times requested by you, including for reasonable personal travel
that will be included as taxable income to you.
RELOCATION
As specified above, your office as CEO will be located in Columbia, Maryland,
and you will relocate to the Columbia area in conjunction with assuming that
position (unless otherwise
Xxxxxx X. Xxxxx January 19, 2005 Page 8
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agreed by the Board). Therefore, you will be entitled to receive principal
residence relocation assistance under the Company's relocation policy applicable
to the relocation of active employees. A copy of that policy has previously been
provided to you.
NOTICES
Except as otherwise provided herein, you and the Company agree that any notices
and other communications permitted or required under this letter agreement shall
be in writing and shall be given by hand delivery to the other party or sent by
registered or certified mail, return receipt requested, postage prepaid, or by
nationally recognized overnight courier service, addressed as follows:
If to you:
Xxxxxx X. Xxxxx
X. X. Xxxxx & Co.
0000 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
If to the Company:
X. X. Xxxxx & Co.
Attention: General Counsel
0000 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
or to such other addresses as either party furnishes to the other in writing in
accordance with this notice provision. Notices and communications shall be
effective when actually received by the addressee.
NO MITIGATION; NO SET OFF
In the event of any termination of employment hereunder, you shall be under no
obligation to seek other employment and there shall be no offset against any
amounts due to you under this letter agreement on account of any remuneration
attributable to any subsequent employment you may obtain. The amounts payable
hereunder shall not be subject to setoff, counterclaim, recoupment, defense or
other right which the Company may have against you.
SUCCESSORS
Except as otherwise provided herein, this letter agreement is personal to you,
and without the prior written consent of the Company shall not be assignable by
you other than by will or the laws of descent and distribution. This agreement
shall inure to the benefit of and be enforceable by your legal representatives.
This agreement shall inure to the benefit of and be binding upon the Company and
its successors and assigns. Except as provided herein, this agreement shall not
be assignable by the Company without your prior written consent. The Company
shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the
Xxxxxx X. Xxxxx January 19, 2005 Page 9
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Company to assume expressly and agree to perform this agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. "Company" means the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid that assumes and agrees to perform this agreement by operation of law
or otherwise.
SURVIVORSHIP
The respective rights and obligations of the parties hereunder shall survive any
termination of your employment to the extent necessary to effect those rights
and obligations.
VACATION
As an officer of the Company, you shall be entitled to four weeks paid vacation
per full calendar year of employment with the Company.
CONFIDENTIALITY AND NON-COMPETE AGREEMENTS
Xxxx, of course, the Company's standard employment agreement (the "Standard
Agreement"), which includes agreements regarding the confidentiality of Company
information and non-competition, and similar provisions, which you signed in
order to commence employment with the Company shall remain in full force and
effect; except you and the Company agree that, 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, and that 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 letter
agreement. A copy of the Standard Agreement that you signed has previously been
provided to you.
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.
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
agreement, executed by you and the Company.
Xxxxxx X. Xxxxx January 19, 2005 Page 10
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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 W. Xxxxx XxXxxxx, Senior Vice President,
Administration, at (000) 000-0000.
Xxxx, again, we are very excited about your election as CEO and look forward to
continuing our productive and rewarding relationship.
Sincerely,
Xxxx X. Xxxxxx
Chairman & Chief Executive Officer
X. X. Xxxxx & Co.
Attachment
cc: X. X. XxXxxxx
AGREED AND ACCEPTED:
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Xxxxxx X. Xxxxx
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Date
