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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") made effective as
of the 30th day of January, 1997 (the "Effective Date") by and between
Tekni-Plex, Inc., a Delaware corporation (the "Employer"), having its principal
offices at 000 Xxxxxxxxxx Xxxxxxx, Xxxxxxxxxx, XX 00000, and F. Xxxxxxx Xxxxx,
an individual (the "Executive"), residing at 0000 Xxxxxxx Xxxxx, Xxxx, XX 00000.
W I T N E S S E T H:
WHEREAS, the Employer desires to retain the Executive as the
Chairman of the Board of Directors and Chief Executive Officer of Employer, and
the Executive is willing, upon the terms and conditions herein set forth, to
serve as Chairman of the Board of Directors and Chief Executive Officer of
Employer.
WHEREAS, this Agreement supersedes the original Employment
Agreement between Employer and Executive dated as of March 18, 1994, Amendment
Number 1 to the Employment Agreement dated as of July 11, 1995, and Amendment
Number 2 to the Employment Agreement dated as of February 21, 1996
(collectively, the "Prior Agreements").
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants contained in this Agreement, the Employer and the Executive,
intending to be legally bound hereby, agree as follows:
1. Employment. Subject to the terms and conditions hereinafter
set forth, the Employer hereby employs the Executive as Chairman of the Board of
Directors and Chief Executive Officer of Employer, and the Executive hereby
accepts such employment.
2. Term. The term of employment of the Executive by the
Employer pursuant to this Agreement (the "Employment Term") shall commence as of
the effective date hereof, and shall reflect continuing and continuous
employment of Executive by Employer from March 18, 1994. The term of employment
pursuant to this agreement shall terminate upon the earlier of: (a) June 30,
2000, to coincide with the fiscal year-end of Employer, or (b) the date on which
the employment of the Executive is terminated pursuant to Section 9 hereof.
Absent written notice of intent not to renew by either party 90 days prior to
the end of each fiscal year, the term of this Agreement shall be automatically
extended at the end of each fiscal year of Employer, for a period of one year,
beginning with the end of fiscal year 1998.
3. Duties. During the Employment Term, the Executive shall
devote such time as necessary to discharge his duties and responsibilities as
Chairman of the Board of Directors and Chief Executive Officer of the Employer
and shall possess all rights
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and authorities as have been exercised previously under the Prior Agreements,
such duties and authorities not to be diminished. In addition to the foregoing,
the Executive shall hold, without the requirement of additional compensation
therefor, such other offices, directorships or memberships of committees of the
Employer and/or any subsidiary or affiliate of the Employer, as the Board of
Directors may reasonably request, and to which, from time to time, during the
Employment Term, the Executive may be elected or appointed.
4. Salary Compensation. In consideration of the services to be
rendered by the Executive as described in Section 3 above, the Employer shall
pay or cause to be paid to the Executive during the Employment Term, and the
Executive shall accept, compensation at the rate of five hundred fifty thousand
($550,000.00) dollars per annum (the current "Base Salary"), such compensation
subject to increase, but not decrease. The Base Salary shall be reviewed and
adjusted upon the consummation of any future acquisition, and shall otherwise be
subject to an annual merit review as of the anniversary date of the last
adjustment. The Base Salary shall be payable in equal installments in accordance
with the usual payroll practices of Employer which are in effect from time to
time during the Employment Term, but in no event less frequently than monthly.
The Executive's Base Salary shall be subject to all applicable withholding and
other taxes.
5. Bonus Compensation. At the end of each of the Employer's
fiscal years, the Executive shall be entitled to receive from the Employer a
performance bonus (the "Performance Bonus").
(a) The amount of the Performance Bonus shall be determined by
the level of actual earnings before interest, taxes, depreciation and
amortization, and extraordinary items ("EBITDA") of Employer, reduced by actual
capital expenditures ("Cap-Ex") incurred in such year (actual EBITDA reduced by
actual Cap-Ex defining the "Actual Performance"). Extraordinary items shall
include management fees, board of directors fees and expenses, executive
management bonuses, investment income, expenses incurred in pursuit of
acquisitions not consummated, expenditures associated with the consummation of
acquisitions, and any other expense categories determined by the Employer's
independent auditors to be properly so classified according to generally
accepted accounting principles. The determination of the Employer's actual
EBITDA for purposes of calculating the amount of the Performance Bonus to which
the Executive is entitled, and the amount of such Performance Bonus, shall be
made by the independent public accountants then auditing the books and records
of the Employer (the "Auditors") and shall be based on audited financial
statements of the Employer. Such determination shall be made in accordance with
generally accepted accounting principles applied on a consistent basis, and the
determination of the Auditors shall be final and binding on the parties hereto.
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(b) The Performance Bonus to which the Executive is entitled
for any fiscal year of Employer shall be determined by the degree to which the
Actual Performance (actual EBITDA reduced by actual Cap-Ex as defined above)
compares with the Targeted Performance for that fiscal year. The term "Targeted
Performance" is defined as the targeted EBITDA reduced by the targeted Cap-Ex
for any given fiscal year. For fiscal years ended June 27, 1997 and beyond, the
targeted EBITDA and targeted Cap-Ex are listed in Exhibit A, attached hereto and
incorporated herein. Upon the consummation of future acquisitions or
divestitures, targeted EBITDA and targeted Cap-Ex are subject to modification by
mutual agreement of the Employer and the Executive, and, in such event, Exhibit
A shall be modified accordingly. Calculation of the Executive's Performance
Bonus shall be accomplished by comparison of the Actual Performance and Targeted
Performance for any given fiscal year, and shall be determined by calculation of
the performance percentage (the "Performance Percentage") for such year. The
Performance Percentage is a ratio, the numerator of which is the Actual
Performance, and the denominator of which is the Targeted Performance, adjusted
per Section 5(c) below, for the same fiscal year. The amount of the Performance
Bonus for any given fiscal year shall be the amount that corresponds to the
Performance Percentage for that year, as set forth on Exhibit B, attached
hereto. If the Performance Percentage achieved in a given fiscal year is an
amount not specifically enumerated on Exhibit B, then the Performance Bonus
shall be determined by the process of linear interpolation between the two
Performance Percentage values on Exhibit B most closely equal to the actual
Performance Percentage.
(c) The Executive may, at Executive's sole discretion,
identify and reclassify any capital expenditures, targeted but not spent during
any fiscal year under consideration, as capital Executive expects to be spent
during the following fiscal year ("Delayed Cap-Ex"). For any such year for which
Delayed Cap-Ex has been identified by the Executive, the Actual Performance for
the fiscal year under consideration shall be reduced, dollar-for-dollar, and the
Targeted Cap-Ex for the following fiscal year shall be increased by the same
amount. The calculation of the Performance Percentage for each fiscal year shall
reflect such adjustments accordingly. Employer hereby acknowledges that, for
fiscal year 1996, the Executive identified Delayed Cap-Ex in the amount of
$1,600,000.00, and Executive's Actual Performance for fiscal year 1996 was
reduced by that amount prior to calculation of Executive's Performance
Percentage for fiscal year 1996. Accordingly, the Targeted Cap-Ex for fiscal
year 1997 shall be increased by $1,600,000.00 over the amount shown in Exhibit
A, for purposes of calculating Executive's Performance Bonus for fiscal 1997.
(d) The Performance Bonus shall be determined as
follows:
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(i) For Actual Performance equal to the Targeted Performance
(Performance Percentage equal to 100%), the Executive will receive a
Performance Bonus equal to 66.7% of his Base Salary.
(ii) The threshold at which a Performance Bonus shall begin
to be earned will be at 80% of the Targeted Performance (the "Threshold
Performance"). At an Actual Performance equal to the Threshold
Performance (Performance Percentage equal to 80%), the Executive will
receive a Performance Bonus equal to 33.3% of his Base Salary.
(iii) Linear interpolation shall be used to calculate the
Performance Bonus for Actual Performance falling between the Threshold
Performance and the Targeted Performance (that is, where the
Performance Percentage falls between 80% and 100%).
(iv) For Actual Performance levels in excess of Targeted
Performance (the "Excess Actual Performance," or "EAP"), the Executive
shall receive, in addition to the Performance Bonus payable at Targeted
Performance, a
percentage of the EAP as follows:
EAP as Percentage of Percentage of EAP
Targeted Performance Allocated to Executive
-------------------- ----------------------
greater than 0% but less than 10% 10%
greater than or equal to 10% but less than 20% 11%
greater than or equal to 20% but less than 30% 12%
greater than or equal to 30% but less than 40% 13%
greater than or equal to 40% but less than 50% 14%
greater than or equal to 50% 15%
Examples of calculations at various performance levels are
shown in Exhibit C attached hereto.
(e) Any Performance Bonus earned shall be payable in cash by
the Employer to the Executive within thirty (30) days following determination by
the Auditors of the amount of the Performance Bonus, but in no event later than
ninety (90) days following the end of the Employer's fiscal year for which such
Performance Bonus is payable, provided that the Employer is not in default under
any of its obligations pursuant to its then applicable loan agreements (the
"Loan Documents") in which case the lender must approve the payment. In the
event approval is required but not received within the thirty day time period,
then such payment will be deferred until such time the lender permits the
payment thereof, or until the aforementioned default is cured, whichever occurs
first. Any amounts deferred pursuant to this paragraph shall earn interest as
described in Section 5(f) of this Agreement. In any event, the bonus earned is
not lost to the Executive; it is merely deferred until either the lender's
approval is received or the default is cured. At Executive's
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option, the Performance Bonus earned may be paid in two installments, the first
being the maximum amount that avoids an event of default under the Employer's
loan agreements, such portion to be paid immediately, and a second installment
payable, with interest, when the lender's approval is received or the default is
cured, as described above.
(f) The amount of any Performance Bonus deferred by operation
of Section 5(e) above, shall accrue interest at Employer's then current average
cost of borrowed funds or 8% per annum, whichever is greater. Such Performance
Bonus together with any accrued interest shall be paid to the Executive upon
satisfaction of the requirements of Section 5(e) above.
(g) In the event that in any fiscal year for which the
Executive is employed hereunder during a period less than the full fiscal year,
the Performance Bonus for such period shall be calculated using a Performance
Percentage wherein the numerator is the Actual Performance for the fiscal
year-to-date through Executive's last date of employment and the denominator is
the Targeted Performance, pro rated for the actual number of days the Executive
was employed during such year, and such pro rated Targeted Performance then
adjusted by any carryover of Delayed Cap-Ex from the previous fiscal year.
6. Employment Benefits. During the Employment Term, the
Executive shall be entitled, in addition to the benefits generally available to
other executive officers of Employer, the following employment benefits at
Employer's cost:
(a) Four weeks paid vacation for each year of the Employment
Term and sick leave in accordance with the Employer's policies from
time to time in effect for executive officers of the Employer.
(b) Participation in a reasonable medical and hospitalization
plan, but in no event providing lesser benefits than those in effect at
March 18, 1994, and applicable to its executive officers generally.
(c) A long-term disability policy (non-Employer policy naming
Executive as beneficiary and owner) providing for benefits in the
amount of 50% of Executive's Base Salary to age 65, and Executive's
compensation shall be grossed-up annually to cover any additional taxes
resulting from the annual premium paid for such policy by the Employer
and treated as compensation to the Executive.
(d) Participation, subject to classification requirements and
continued maintenance thereof by Employer, in other employee benefit
plans, such as profit sharing plans, which are from time to time
applicable to the Employer's executive officers generally.
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(e) In the event Executive is relocated, a temporary monthly
living allowance until Executive is permanently relocated to cover
reasonable living and travel expenses in connection with maintenance of
a temporary residence, reimbursement, upon presentation of appropriate
receipts, of all reasonable moving expenses, brokerage commissions and
closing expenses related to the sale of his current residence and the
purchase of his new residence, and, following such relocation, provided
Executive's current home remains unrented and a good faith effort is
being made to sell Executive's current residence, Employer shall
reimburse Executive for the cost of interest on mortgages (not to
exceed current levels of debt) and real estate taxes for a period not
to exceed twelve months.
(f) A leased Lincoln Continental (or comparable) automobile.
(g) Tax return preparation and reasonable financial planning
services.
(h) A $1 million term life insurance policy on the Executive's
life for a beneficiary selected by him.
(i) The reasonable cost of a country club membership (and
dues).
7. Expenses. During the Employment Term, the Employer will
reimburse the Executive, upon presentation of appropriate receipts, for all
travel, entertainment and other out-of-pocket expenses which are reasonably
incurred by the Executive in the performance of his duties hereunder.
8. Insurance. The Executive agrees to cooperate with the
Employer in obtaining any insurance on the life or on the disability of the
Executive which the Employer may reasonably desire to obtain at its cost for its
own benefit and shall undergo reasonable physical and other examinations for
this sole purpose, and shall execute any consents or applications which the
Employer may reasonably request in connection with the issuance of one or more
of such insurance policies.
9. Termination.
(a) Executive's employment under this Agreement may be
terminated without further liability by Employer at any time for "Cause". For
purposes of this Agreement, Cause is defined as (i) Executive's willful refusal,
after 30 days' prior written notice by Employer (such notice detailing with
specificity the nature of such breach and the steps required to satisfy Employer
that such breach will be cured), to begin to take such steps to cure any
continuing material breach hereof or (ii) a final non-appealable adjudication in
a criminal or civil proceeding that Executive has committed a fraud or felony
relating to his employment.
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(b) In addition to life insurance benefits which will be
payable in lump sum, in the event of Executive's death during the Employment
Term, the Employer will pay a severance benefit (the "Severance Benefit"), as
defined below, to Executive's designated beneficiary (or, failing such
designation, to his estate) payable in 12 equal monthly installments. The
Severance Benefit shall consist of an amount equal to the then current annual
Base Salary, a pro rated Performance Bonus for the then current fiscal year
calculated according to Section 5(g) above, any Performance Bonus amounts earned
in prior fiscal years but unpaid, and any other accrued benefits due and payable
at the time of Executive's death.
(c) In the event of Executive's disability or incapacity which
renders him unable to perform his duties for a period in excess of 120
consecutive days or a total of more than 180 days in any 12-month period, the
Employer may terminate this Agreement. Upon termination under this Section 9(c),
Employer will pay Executive the Severance Benefit as defined above. In addition,
Employer will cause ownership of all insurance policies on Executive's life to
be transferred to Executive.
(d) If, at any time during the Employment Term, the Executive
resigns from the employ of the Employer for any reason other than Employer's
failure to meet its obligations hereunder, Employer and Executive shall have no
further obligations hereunder after such resignation date other than the payment
of amounts accrued and unpaid under Sections 4, 5, 6 and 7 hereof through such
resignation date, and continuing obligations under Sections 10 and 11 hereof.
10. Restrictive Covenant. Without prior written consent of the
Board of Directors of Employer, such consent not to be unreasonably withheld,
Executive agrees that he will not for a period of one year following the
termination by Executive of his employment with Employer whether before or after
the expiration of the Employment Term (or to such lesser extent and for such
lesser period as may be deemed enforceable by a court of competent jurisdiction,
it being the intention of the parties that this Section 10 shall be so
enforced): (i) directly or indirectly engage, in the United States, in any
business in competition with the primary business conducted by Employer, either
as employee, independent contractor, owner, partner, lender or stockholder, at
the time of termination of the Executive (provided that the foregoing shall not
be construed to prohibit ownership of less than 5% of the outstanding shares of
any public corporation); (ii) solicit, canvass, or accept any business for any
other competing company, or business similar to any business of Employer, from
any past, present or future ("future," as used herein, shall mean at or prior to
the time of termination of employment) customer of Employer; (iii) directly or
indirectly induce or attempt to influence any employee of Employer to terminate
his employment; or (iv) directly or indirectly request any present or future (as
defined above)
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entities with whom Employer has significant business relationships to curtail or
cancel their business with Employer. In addition and without limiting the
foregoing, upon the termination of the Executive's employment by the Employer
for any reason, whether before or after the expiration of the term of this
Agreement, Executive shall not (x) at any time directly or indirectly disclose
to any person, firm or corporation any trade, technical or technological
secrets, or (y) for a period of one year following termination disclose any
details of organization or business affairs, or any names of past or present
customers of Employer. For purposes of this Section 10, the term "Employer"
shall be deemed to include Employer and all of its subsidiary corporations.
11. Inventions. All inventions, discoveries, improvements,
processes, formulae and data relating to Employer's business that Executive may
make, conceive or learn during the employment of the Executive with the Employer
(during the term of this Agreement, whether during working hours or otherwise)
and relating to the Employer's lines of business shall be the exclusive property
of Employer. Executive agrees to make prompt disclosure to the Board of
Directors of Employer of all such inventions, etc., and to do at Employer's
expense all lawful things necessary or useful to assist Employer in securing
their full enjoyment and protection. In the event of any breach or threatened
breach of the provisions of this Section 11 or the preceding Section 10,
Employer may apply to any court of competent jurisdiction to enjoin such breach.
Any such remedy shall be in addition to Employer's remedies at law under such
circumstances.
12. Conflicting Agreements. Each of the parties hereby
represents and warrants to the other that (a) neither the execution of this
Agreement by such party nor the performance by such party of any of its
obligations or duties hereunder will conflict with or violate or constitute a
breach of the terms of any other agreement to which such party is a party or by
which it is bound, and (b) such party is not required to obtain the consent of
any person, firm, corporation or other entity in order to enter into this
Agreement or to perform any of his obligations or duties hereunder.
13. Notices. Any notice, request, information or other
document to be given under this Agreement to any party by any other party shall
be in writing and delivered personally, sent by registered or certified mail,
postage prepaid, delivered by a nationally recognized overnight courier service,
or transmitted by facsimile machine followed by delivery of original documents
by a nationally recognized overnight courier service addressed as follows:
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If to Employer:
MST Partners
000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attention: Mr. J. Xxxxxx XxXxxxx
Facsimile No.: (000) 000-0000
with a copy to
Winthrop, Stimson, Xxxxxx & Xxxxxxx
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to the Executive:
F. Xxxxxxx Xxxxx
at his then current address
included in the employment records
of the Employer
with a copy to:
Xxxxx X. Xxxxxxxx, Esq.
The Xxxxx Firm P.C.
0000 Xxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
or to such other address as a party hereto may hereafter designate in writing to
the other party, provided that any notice of a change of address shall become
effective only upon receipt thereof.
14. Assignment; Successors and Assigns. This Agreement may not
be assigned by either party. This Agreement shall be binding upon and shall
inure to the benefit of the Employer and the Executive and their respective
heirs, legal representatives, successors and assigns.
15. Entire Agreement. This Agreement contains the entire
understanding between the Employer and the Executive with respect to the
employment of the Executive and supersedes all prior negotiations and
understandings between the Employer and the Executive with respect to the
employment of the Executive by the Employer. This Agreement may not be amended
or modified except by a written instrument signed by both the Employer and the
Executive.
16. Severability. In the event any one or more provisions of
this Agreement is held to be invalid or unenforceable, such illegality or
unenforceability shall not
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affect the validity or enforceability of the other provisions hereof and such
other provisions shall remain in full force and effect, unaffected by such
invalidity or unenforceability.
17. Construction. The parties hereto acknowledge and agree
that: (i) each party and its counsel reviewed and negotiated the terms and
provisions of this Agreement and have contributed to its revision; (ii) the rule
of construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (iii) the terms and provisions of this Agreement shall be construed fairly
as to all parties hereto and not in favor of or against any party, regardless of
which party was generally responsible for the preparation of this Agreement.
18. Applicable Law; Submission to Jurisdiction; Litigation
Expenses. This Agreement and the rights, obligations and relations of the
parties hereto shall be governed by and construed and enforced in accordance
with the laws of the State of New York without giving effect to the principles
of conflicts of law thereof.
The parties hereto (i) submit for themselves, and any legal
action or proceeding relating to this Agreement or for recognition and
enforcement of any judgment in respect hereof, to the exclusive jurisdiction of
the courts of the State of New York, the courts of the United States of America
for the Southern District of New York, and appellate courts from any therefor,
(ii) consent that any action or proceeding shall be brought in such courts, and
waive any objection that each may now or hereafter have to the venue of any such
action or proceeding in any such court, (iii) agree that service of process of
any such action or proceeding may be effected by certified mail (or any
substantially similar form of mail), postage prepaid, to the appropriate party
at its address as set forth herein, and service made shall be deemed to be
completed upon the earlier of actual receipt or five (5) days after the same
shall have been posted as aforesaid, and (iv) agree that nothing herein shall
affect the right to effect service of process in any other manner permitted by
law.
The prevailing party in any litigation relating to this
Agreement shall be entitled to recover reasonable professional fees, including
attorneys' fees and litigation expenses relating to such dispute.
19. Headings. The headings of sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
20. Execution in Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed to be an original, but all of
which, when taken together, shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
TEKNI-PLEX, INC.
By:/s/ Xxxxxx X. Xxxx
---------------------------
Name: Xxxxxx X. Xxxx
Title: Secretary & Director
/s/ F. Xxxxxxx Xxxxx
------------------------------
F. Xxxxxxx Xxxxx
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EXHIBIT A
TARGETED PERFORMANCE
($000)
FISCAL YEAR TARGETED TARGETED
ENDED EBITDA CAP-EX
----- ------ ------
June 27, 1997 26,811 6,807
July 3, 1998 29,173 5,700
July 2, 1999 30,625 4,700
June 30, 2000 31,806 6,900
June 29, 2001 33,030 4,075
June 28, 2002 34,238 4,075
June 27, 2003 35,554 4,100
July 2, 2004 36,922 4,100
July 1, 2005 38,273 4,100
June 30, 2006 39,643 4,100
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EXHIBIT B
PERFORMANCE BONUSES
Performance Incremental
Bonus Performance
Performance (% Base Bonus
Percentage Salary) (% EAP)
---------- ------- -------
80% 33.3%
85% 41.7%
90% 50.0%
95% 58.3%
100% 66.7%
105% 66.7% 10.0%
110% 66.7% 11.0%
115% 66.7% 11.0%
120% 66.7% 12.0%
125% 66.7% 12.0%
130% 66.7% 13.0%
135% 66.7% 13.0%
140% 66.7% 14.0%
145% 66.7% 14.0%
150% 66.7% 15.0%
155% 66.7% 15.0%
160% 66.7% 15.0%
165% 66.7% 15.0%
170% 66.7% 15.0%
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EXHIBIT C
EXAMPLES OF PERFORMANCE BONUS CALCULATIONS
Example Targeted Performance = $20,000,000
Assumed Base Salary = $550,000
Performance Bonus Performance
Percentage Calculation Bonus (000)
---------- ----------- -----------
75% N/A 0
80% 0.333 x 550 = 183
92% 0.533 x 550 = 293
100% 0.667 x 550 = 367
109% Incremental Performance = 0.09 x 20000 = 1800
Incremental Bonus = 0.10 x 1800 = 180
Total Bonus = 367 + 180 = 547
115% 1st Incremental Performance = 0.10 x 20000 =
2000
2nd Incremental Performance = 0.05 x 20000 =
1000
1st Incremental Bonus = 0.10 x 2000 = 200
2nd Incremental Bonus = 0.11 x 1000 = 110
Total Bonus = 367 + 200 + 110 = 677
122% 1st Incremental Performance = 0.10 x 20000 =
2000
2nd Incremental Performance = 0.10 x 20000 =
2000
3rd Incremental Performance = 0.02 x 20000 =
400
1st Incremental Bonus = 0.10 x 2000 = 200
2nd Incremental Bonus = 0.11 x 2000 = 220
3rd Incremental Bonus = 0.12 x 400 = 48
Total Bonus = 367 + 200 + 220 + 48 = 835
