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EXHIBIT 10.3
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May 18, 1999
Xx. Xxxxx X. Xxxxxx
Executive Vice President,
Finance & Operations
Xxxxxx Greetings, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Dear Xxx:
This letter will amend certain existing provisions of your Employment Agreement
dated September 29, 1997 and set forth additional terms and provisions which
will govern your employment in the event of a Change of Control of the Company
(as defined below).
The last two sentences of the first numbered paragraph of your Employment
Agreement shall be deleted and the following language shall be inserted in their
place:
"This Lump Sum shall be an amount equal to twice your annual salary at
the time of breach or termination, including Base Salary and any bonus
awarded to you in the last twelve months. There shall be no reduction
of the calculation of the Lump Sum as a consequence of your continued
employment. The Company shall also reimburse you the cost of continuing
medical insurance pursuant to COBRA following any termination under
this paragraph which entitles you to receive a Lump Sum payment."
The following language shall be added to the Employment Agreement as a newly
numbered Section 1a:
"In the event that within a twenty-four month period following a Change
of Control of the Company, the terms of this Agreement are materially
breached by the Company, your employment with the Company is terminated
by the Company without Cause, or you terminate your employment for Good
Reason (as defined below), the Company shall, within five (5) business
days following such termination or breach pay you a Lump Sum as
provided for in Section 1 above but in an amount equal to 3 times your
annual salary (not less than your Base Salary) at the time of breach or
termination, including Base
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May 18, 1999
Page 2 of 5
Salary and any bonus awarded to you in the last twelve months, less
customary deductions for Federal and state tax withholding and FICA, if
any. The Company shall also reimburse you the cost of continuing
medical insurance pursuant to COBRA following any termination pursuant
to this paragraph."
It is possible that the payments specified in this agreement may be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code
of 1986 (the "Code"), as amended (or any similar tax that may hereinafter be
imposed) because of "excess parachute payments," as defined in Section 280G of
the Code. You and the Company agree that any amount payable pursuant to this
Agreement and other agreements shall be reduced by such amount as shall be
necessary to avoid the imposition of the Excise Tax.
Definitions:
CHANGE OF CONTROL: A Change of Control as used herein shall be deemed to have
occurred if the conditions set forth in any of the following paragraphs shall
have been satisfied:
1. Any Person is or becomes the beneficial owner ("Beneficial
Owner"), as defined in Rule 13d-3 of the Securities Exchange
Act of 1934, as amended from time to time ("Exchange Act"),
directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the
Company's then outstanding securities; or
2. During any period of two consecutive years or less (not
including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by
a Person who has entered into an agreement with the Company, to
effect a transaction Described in clause (1), (3) or (4) of
this definition and other than a director proposed for election
in a proxy contest other than proposed by management) whose
election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute a majority of the Board; or
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May 18, 1999
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3. The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than (a) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with
the ownership of any trustee or other fiduciary holding
securities prior to such merger or consolidation under an
employee benefit plan of the Company or such surviving entity
or any parent thereof outstanding immediately after such merger
or consolidation, or (b) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person acquires more than 50% of the
combined voting power of the Company's then outstanding
securities; or
4. The stockholders of the Company approve a plan to complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets.
As used in the Paragraph, "Person" shall have the meaning given
in Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof: however, a Person shall not
include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, which
held stock of the Company prior to the Change of Control, (iii)
an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned
directly or indirectly, both immediately before and immediately
after the Change of Control event, by the Stockholders of the
Company in substantially the same proportions as their
ownership of stock of the Company.
GOOD REASON: "Good Reason" shall mean the occurrence of any of the following
circumstances:
1. the assignment to you of any duties inconsistent with the
position that you held immediately prior to the Change of
Control of the Company, or significant adverse alteration in
the nature or status of your responsibilities or the conditions
of your employment
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May 18, 1999
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from those in effect immediately prior to such Change of
Control;
2. the relocation of Company's office at which you are employed to
a location more than 25 miles from the Company's office
immediately prior to the Change of Control, or the Company's
requiring you to be based anywhere other than the Company's
offices at such location except for required travel on
Company's business to an extent substantially consistent with
your business travel obligations at the time of the Change of
Control;
3. the failure by the Company to continue in effect any material
compensation or other benefit plan or arrangement in which you
participated immediately prior to the Change of Control of the
Company unless an equitable and substantially comparable
arrangement (embodied in a substitute or alternative plan) has
been made with respect to such plan or arrangement, or the
failure by the Company to continue your participation therein
(or in such substitute or alternative plan or arrangement) on a
basis not less favorable, both in terms of the amount or
benefit provided and the level of participation relative to
other participants, as existed at the time of the Change of
Control of the Company.
CAUSE: "Cause" as used herein shall be defined as fraud, gross negligence or
willful misconduct in the performance of your duties or a willful and material
breach of your Employment Agreement.
Paragraph 13 and Paragraph 14 of your Employment Agreement shall both be amended
by adding the following language at the end of the parenthetical phrase in the
first sentence of each numbered paragraph, "or for Good Reason within a
twenty-four month period following a Change of Control as both terms are defined
in Section 1a hereof."
Likewise Paragraph 13 of your Employment Agreement shall be amended by adding
after the comma in the penultimate line, the phrase "and, except for the
provisions for termination pay contained in Section 1a of this Agreement in the
event of a voluntary termination by you for Good Reason within a twenty-four
month period following a Change of Control of the Company,".
All other provisions of your Employment Agreement shall remain in full force and
effect.
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May 18, 1999
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In addition to the amendments to your Employment Agreement set forth above, the
Company shall immediately take steps to amend all of its qualified and
non-qualified stock option plans and stock incentive plans to provide for all
stock options and stock awards to automatically vest in full and become
exercisable in full in the event of a Change of Control as defined above. Said
amendments shall remain in effect during the term of your Employment Agreement.
The Company's Supplemental Executive Retirement Plan and ERISA Makeup Plan
presently provide for immediate vesting in the event of a Change of Control as
defined above and these provisions shall remain in effect during the term of
your Employment Agreement.
To indicate your acceptance of the terms set forth in this letter, please sign
one Duplicate original of this letter where indicated below and return it to me.
Sincerely,
XXXXXX GREETINGS, INC.
By: /s/ Xxxxx X. X'Xxxxxxx
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Xxxxx X. X'Xxxxxxx,
President and
Chief Executive Officer
Date: 5/18/99
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ACCEPTED AND AGREED TO:
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
Date: 6/9/99
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FJO/HLC/dld
