1
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of June 1, 1997 by and between Xxxxxxx Container
Corporation, a Delaware corporation ("Xxxxxxx"), and Xxxxxx X. Xxxxxxxxx
("Xxxxxxxxx").
Xxxxxxx and Xxxxxxxxx desire to enter into an Employment Agreement (the
"Agreement"). Accordingly, Xxxxxxx and Xxxxxxxxx agree as follows:
ARTICLE 1
Employment
Section 1.01. Effective Date; Position; Term.
This Agreement shall become effective on June 1, 1997 (the "Effective
Date"). Xxxxxxx shall employ Xxxxxxxxx as Chief Executive Officer of Xxxxxxx
for a term (the "Employment Period") commencing on the Effective Date and
continuing until December 31, 2000, subject to earlier termination pursuant to
Article 3 hereof.
Section 1.02. Duties.
During the Employment Period, (a) Xxxxxxxxx shall have the normal
responsibilities, duties and authorities of a chief executive officer, subject
to the power of the Board of Directors of Xxxxxxx (the "Board") to expand or
limit such duties and to override actions of a chief executive officer, and (b)
Xxxxxxxxx shall perform faithfully the executive duties assigned to him by the
Board to the best of his ability and will devote such time and attention to
Gaylord's affairs as is reasonably necessary to accomplish the purposes of this
Agreement. Xxxxxxxxx'x residence and principal office during the Employment
Period will be located in Des Moines, Iowa.
ARTICLE 2
Compensation
Section 2.01. Basic Compensation.
(a) Base Salary. As compensation for his services hereunder, Xxxxxxx
shall pay to Xxxxxxxxx during the Employment Period a base salary at the rate
of at least $750,000 per annum. Such compensation shall be payable in equal
installments in arrears on a semi-monthly basis, or as otherwise may be
mutually agreed upon.
2
(b) Salary Reviews. While this Agreement remains in effect, the annual
base salary provided in Section 2.01(a), above, may, in the sole discretion of
the Board, be reviewed at any time to ascertain whether such base salary should
be increased or decreased. In the event the board determines that Xxxxxxxxx'x
base salary should be revised, his base salary payable for the remaining term
of this Agreement pursuant to (a) above shall be such revised amount unless
such amount in turn is increased or decreased on subsequent annual review, in
which event the last such revised amount shall represent Xxxxxxxxx'x annual
base salary for the then remaining term of this Agreement. Notwithstanding the
above, in no event shall Xxxxxxxxx'x base salary be less than $750,000 per
anum.
Section 2.02. Shareholder Value Plan.
During the term of this Agreement (subject to earlier termination pursuant
to Article 3 hereof and the Shareholder Value Plan), Xxxxxxxxx shall be
entitled to participate in the Shareholder Value Plan, as currently in effect
through December 31, 1997 and as amended and restated effective January 1,
1998, as outlined in Exhibit A to this Agreement.
Section 2.03. Participation in Employee Benefit Plans.
Xxxxxxxxx will be entitled to participate in all Xxxxxxx salaried employee
benefit plans and programs, including the Xxxxxxx Container Retirement Plan
(the "Retirement Plan"), subject to the terms and conditions of each such
employee benefit plan or program and to the extent commensurate with his
position as Chief Executive Officer of Xxxxxxx.
Section 2.04. Supplemental Retirement Payments.
(a) Xxxxxxxxx will be entitled to receive monthly supplemental retirement
income payments commencing on the effective date of Xxxxxxxxx'x retirement.
(b) If such monthly supplemental retirement income payments are to be paid
in the form of a single life annuity, the amount of such monthly payments shall
be equal to the excess of (A) 1/24th of his average annualized base salary and
Bonus Accrued for the four highest years of service with Xxxxxxx over (B) the
sum of (i) his monthly benefits under the Xxxxxxx retirement Plan and (ii) his
monthly primary Social Security benefits as determined for purposes of
computing Retirement Plan benefits.
(c) If supplemental retirement income payments are to be paid in a form
other than a single life annuity, the amount of such payments will be reduced
by appropriate actuarial reductions. Supplemental retirement income payments
will be paid under the form of payment that parallels the form Xxxxxxxxx elects
under the Retirement Plan, unless otherwise mutually agreed upon.
(d) For purposes of this Section 2.04, "Bonus Accrued" for a year means
(i) with respect to the Shareholder Value Plan, Xxxxxxxxx'x earned and paid
award through December
-2-
3
31 of such year and (ii) with respect to bonuses for
years ended prior to January 1, 1993, Xxxxxxxxx'x bonus awarded for such year.
(e) For purposes of this Section 2.04, Xxxxxxxxx'x base salary and Bonus
Accrued (and his years of service) shall include such base salary and Bonus
Accrued from Mid America Packaging, Inc. prior to its combination with Xxxxxxx,
including management fees (but not reimbursement of expenses) paid by Xxxxxxx
and Mid America Packaging to Mid America Development Company and/or Mid-America
Group through May 31, 1998. See Exhibit B for Supplemental Retirement Plan pay
history, i.e., "base salary and Bonus Accrued", for Xxxxxxxxx.
Section 2.05. Eligibility for Future Option Grants.
Xxxxxxxxx agrees that he will not be eligible for any stock option or
restricted stock grants under Gaylord's stock option plans until January 1,
1998.
Section 2.06. Withholding.
Xxxxxxx shall be entitled, if necessary or desirable, to withhold (or
secure payment from Xxxxxxxxx or his personal representative or beneficiary, in
lieu of withholding), the amount of any withholding or other tax due from
Xxxxxxx with respect to any amount payable or paid or any shares issuable or
issued to Xxxxxxxxx (or his personal representative or beneficiary) pursuant to
this Agreement.
Section 2.07. Nontransferability.
Xxxxxxxxx'x interest in the Shareholder Value Plan may not be transferred
other than by (a) will or the laws of descent and distribution, (b) to any
member of Xxxxxxxxx'x family, or (c) to any trust or partnership for the
benefit of any member of Xxxxxxxxx'x family, and, during this lifetime, is
payable only to Xxxxxxxxx or to any transferee permitted by this Section 2.07.
ARTICLE 3
Involuntary Termination of Employment
Section 3.01. Events of Termination.
(a) In the event that during the Employment Period (i) Xxxxxxxxx should
become Totally and Permanently Disabled or (ii) Xxxxxxxxx should commit Serious
Misconduct (as defined in Section 3.02 below), Xxxxxxx (acting by resolution of
the Board) may elect to terminate the Employment Period by written notice to
Xxxxxxxxx. In the case of termination pursuant to item (i) Xxxxxxxxx shall be
entitled to receive full compensation pursuant to Section 2.01 at his then base
salary rate for a period of 12 months following the date of such notice.
-3-
4
(b) In the event the Employment Period terminates because of Xxxxxxxxx'x
death, his personal representative shall be entitled to receive base salary
which is accrued and unpaid as of the date of his death.
(c) The Xxxxxxx Board of Directors will have the right to terminate the
Employment Period and remove and/or replace Xxxxxxxxx as Chief Executive
Officer at any time. In the event that Gaylord's Board elects to terminate the
Employment Period for any reason other than Xxxxxxxxx'x death, total and
permanent disability, or Serious Misconduct or if Xxxxxxxxx resigns for Good
Reason, he shall be entitled to receive his full compensation pursuant to
Section 2.01 at this then base salary rate through December 31, 2000, without
regard to such early termination.
(d) The Shareholder Value Plan describes Xxxxxxxxx'x rights under that
plan, in case of early termination. In the case of any conflict or discrepancy
between the terms hereof and the Shareholder Value Plan, the Shareholder Value
Plan shall control.
Section 3.02. Definition of Certain Terms.
(a) "Totally and Permanently Disabled" means such physical or mental
condition of Xxxxxxxxx as is determined by the Board in its sole discretion to
be expected to continue indefinitely and which renders him incapable of
performing any substantial portion of the services contemplated hereby (as
confirmed by competent medical evidence).
(b) "Serious Misconduct" means embezzlement or misappropriation of
corporate funds, other acts of dishonesty, commission of a felony, willful
refusal to perform or substantial disregard of the duties properly assigned
pursuant to Article 1, significant violation of any statutory or common law
duty of loyalty to Xxxxxxx, repeated acts tending to bring Xxxxxxx into public
disgrace or disrepute, including, but not limited to, alcohol, drug or other
substance abuse, or a material violation of Section 4.02 or Section 4.03
(below).
(c) "Good Reason" means Xxxxxxxxx'x resignation as a direct result of (i)
a substantial diminution of his responsibilities, duties, or authorities as
Gaylord's chief executive officer as compared to his responsibilities, duties
and authorities prior to such diminution, (ii) a reduction of his perquisites
(including the office facilities provided to him), (iii) a change in the
location of his principal office, or (iv) a material breach of this Agreement
by Xxxxxxx, which diminution, reduction, change or breach is not cured within
15 days after written notice by Xxxxxxxxx to Xxxxxxx.
ARTICLE 4
Miscellaneous
Section 4.01. Assignment and Succession.
(a) The rights and obligations of Xxxxxxx under this Agreement shall inure
to the benefit of and be binding upon its respective successors and assigns,
and Xxxxxxxxx'x rights
-4-
5
and obligations hereunder shall inure to the benefit of and be binding upon his
legal representatives.
(b) Xxxxxxxxx acknowledges that the services to be rendered by him
hereunder are unique and personal. Accordingly, Xxxxxxxxx may not pledge or
assign any of his rights or delegate any of his duties or obligations under
this Agreement without the express prior written consent of Xxxxxxx.
(c) Xxxxxxx may not assign its interest in or obligations under this
Agreement without the prior written consent of Xxxxxxxxx.
Section 4.02. Confidential Information.
Xxxxxxxxx acknowledges that the information, observations and data
obtained by him during the course of his performance under this Agreement
concerning the business or affairs of Xxxxxxx is the property of Xxxxxxx.
Therefore, Xxxxxxxxx agrees that he will not at any time disclose to any
unauthorized person or use for his own account any of such information,
observations or data without the Board's written consent unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public other than as a result of Xxxxxxxxx'x acts or omissions
to act, or unless compelled to make such disclosure by order of a court of law.
Xxxxxxxxx agrees to deliver to Xxxxxxx at the termination of his employment,
or at any other time upon reasonable request by Xxxxxxx, all memoranda, notes,
plans, records, reports and other documents relating to the business of Xxxxxxx
which he may then possess or have under his control.
Section 4.03. Covenant Not to Compete.
(a) Xxxxxxxxx agrees that during the term of this Agreement, without
regard to any early termination, and for one year thereafter, he will neither
directly nor indirectly engage in, have any interest in, own, manage, operate,
control, be connected with as a stockholder, joint venturer, officer, employee,
partner or consultant, or invest or participate in, a business competing with
any of the business then conducted (or, to the knowledge of Xxxxxxxxx, planned
to be conducted within one year) by Gaylord or any of its successors or then
subsidiaries.
(b) Nothing contained in this Section 4.03 shall prevent Xxxxxxxxx from
owning up to a 5% interest in any corporation or entity having one or more
classes of its securities listed on a national securities exchange or publicly
traded in the over-the-counter market, provided Xxxxxxxxx is not actively
involved in the operation or management of such corporation or entity.
(c) If under the circumstances existing at the time of enforcement of this
Section 4.03, the period, scope or area described in this Section 4.03 shall be
found or held to be unreasonable, the parties hereto agree that the maximum
period, scope or area reasonable under the circumstances shall be substituted
for the stated period, scope or area.
-5-
6
(d) The parties hereto agree that in the event of the breach of this
Section 4.03 by Xxxxxxxxx, monetary damages alone would not be an adequate
remedy to Xxxxxxx for the injury that would result from such breach, and that
Xxxxxxx shall be entitled, at any time after such breach, to immediately obtain
injunctive relief prohibiting any further breach of this Agreement. Xxxxxxxxx
further agrees that any such injunctive relief obtained by Xxxxxxx shall be in
addition to monetary damages.
(e) For purposes of this paragraph 4.03, Xxxxxxxxx includes Mid America
Group, Ltd. and each entity controlled by Xxxxxxxxx, his wife and children, and
trusts or entities for their benefits.
(f) In the event it is judicially determined, in a final non-appeal
judgement by a court of competent jurisdiction, that Xxxxxxxxx has materially
violated this covenant not to compete, the parties hereto agree that Gaylord's
exclusive remedy for monetary damages against Xxxxxxxxx shall be limited to a
forfeiture by Xxxxxxxxx of any (i) salary payable hereunder after the date of
violation as determined in such final judgement and (ii) deferred awards earned
under the Xxxxxxx Shareholder Value Plan which are payable after the date of
violation as determined in such final judgement.
Section 4.04. Expenses.
Xxxxxxx shall reimburse Xxxxxxxxx for travel, transportation, office and
other expenses he incurs in connection with his duties as Chief Executive
Officer, including, without limitation, expenses of his Des Moines office and
travel to and from his Des Moines office on Xxxxxxx business.
Section 4.05. Entire Agreement.
This Agreement represents the entire agreement between the parties
relating to the subject matters covered thereby (and upon the Effective Date
shall supersede any prior agreement as to such matters) and shall not be
amended or waived except in writing signed by the parties hereto.
Section 4.06. Notices.
Any notice or request required or permitted to be given hereunder shall be
sufficient if in writing and delivered personally or sent by certified or
registered mail, return receipt requested, to the addresses below:
to Xxxxxxx: Xxxxxxx Container Corporation
000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Secretary
-6-
7
to Xxxxxxxxx: Xxxxxx X. Xxxxxxxxx
Regency West - 4
0000 Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxx Xxx Xxxxxx, Xxxx 00000
with a copy to: Xxxxxx X. Xxxxxxxxx
c/o Gaylord Container Corporation
000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Such notice shall be deemed to have been given upon the personal delivery
or such mailing thereof, as the case may be.
Either party shall have the right from time to time to change the address
to which notices shall be sent by a written instruction to the other party.
Section 4.07. Applicable Law.
This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the laws of the State of Illinois.
Section 4.08. Severability.
Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held prohibited by or invalid under applicable
law, such provision will be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
IN WITNESS WHEREOF, Xxxxxxx has caused this Agreement to be signed by its
duly authorized officer and Xxxxxxxxx has signed this Agreement as of the date
first written above.
XXXXXXX CONTAINER CORPORATION
By: Xxxxxx X. Xxxxx
-------------------------
Its: Executive Vice President
------------------------
/s/ Xxxxxx X. Xxxxxxxxx
------------------------
Xxxxxx X. Xxxxxxxxx
-7-
8
EXHIBIT A
XXXXXXX CONTAINER CORPORATION
SHAREHOLDER VALUE PLAN
(as amended and restated effective January 1, 1998)
TERM: Eight years commencing January 1, 1993 through December
31, 2000.
PURPOSE: To focus actions and decision-making on increasing
shareholder value.
PARTICIPANTS: Xxxxxx X. Xxxxxxxxx - Chairman and Chief Executive Officer
MEASUREMENT: Measure year-to-year increase in shareholder value - The
base or beginning share value under the Plan is $3.375
per share.
The increase in value for a given calendar year shall be
determined as follows:
1) Multiply the beginning of year share value ($3.375
for calendar 1993 and, for each subsequent calendar year, the
average closing price for the first ten trading days in January
of such calendar year and the last ten trading days in the prior
calendar year, but in no event less than the highest year-end
share value for any prior calendar year with respect to which an
award was earned hereunder) by 53,365,378 (regardless of the
number of Xxxxxxx shares actually outstanding).
2) Multiply the end of year share value (the average
closing price for the last ten trading days in December of such
calendar year and the first ten trading days in the subsequent
calendar year) by 53,365,378 (regardless of the number of
Xxxxxxx shares actually outstanding).
3) Subtract the result in (1) from the result in (2) -
This represents the increase in share value upon which awards
will be made.
Increased stock price for valuation establishes a new base for a given
calendar year; reduced stock price does establish a new base for a given
calendar year, i.e., award cannot be duplicated.
All calculations hereunder (including share values and number of shares)
will be equitably adjusted by Gaylord's Board of Directors in the event of any
stock split, stock
9
dividend, reverse stock split, consolidation or other recapitalization of
Gaylord's capital stock, so that the awards intended to be granted hereunder
will not be affected thereby.
ACQUISITION
OF XXXXXXX: In the event of an acquisition of Xxxxxxx prior to December 31,
2000, the transaction price will establish the final valuation
under this plan. Upon an acquisition of Xxxxxxx, final
payments including all deferred amounts, if any, which are
earned based on the acquisition price, will be due and payable
at the closing of any such acquisition of Xxxxxxx.
For this purpose, an acquisition of Xxxxxxx means (i) a sale of
substantially all of Gaylord's assets to, or a merger with,
another person for cash and/or property (other than a person
where Gaylord's former shareholders own immediately after such
transaction directly or indirectly stock possessing more than
50% of such person's voting power) or (ii) an acquisition of
Xxxxxxx stock by a person or group (within the meaning of
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) so
that such person or group has acquired stock possessing more
than 50% of Gaylord's voting power (other than a person or
group which includes Xxxxxxxxx, Mid America Group, Ltd., or
Xxxxxx X. Xxxxxxx, or their respective spouses or heirs).
TERMINATION OF
EMPLOYMENT: If Xxxxxxx terminates the employment of Xxxxxxxxx or Xxxxxxxxx
resigns for Good Reason, before the end of a calendar year
other than because of his death, Total and Permanent
Disability, or Serious Misconduct, Xxxxxxxxx shall continue to
participate in this plan for the calendar year in which such
termination occurs and the following calendar year.
If Xxxxxxx terminates Xxxxxxxxx for Serious Misconduct or
Xxxxxxxxx resigns for other than Good Reason, such participant
shall receive no earned award for the calendar year in which
such termination occurred or any subsequent calendar year.
If it is judicially determined in accordance with 4.03(f) of
the Employment Agreement between Xxxxxxxxx and Xxxxxxx that
Xxxxxxxxx violated his covenant not to compete, set forth in
4.03 of such Agreement, then Xxxxxxxxx shall receive no earned
award for (i) calendar year in which such violation occurs, as
set forth in any such final judicial determination, or (ii) any
subsequent calendar year.
If Xxxxxxxxx ceases to be a Gaylord employee because of his
death or Total and Permanent Disability before the end of a
calendar year, (i) the earned award for such calendar year
shall be the amount calculated as set forth in Measurement
above, but using the ten trading days prior to the termination
of
-2-
10
the participant's employment (including the date of termination
if it is a trading day) and the ten trading days after the
termination of his employment, and (ii) such participant shall
be entitled to no earned award for any subsequent year.
EARNED
AWARD: One percent of the annual increase in shareholder value will be
an earned award.
50% of any earned award will be paid as soon as practical
following the measurement period in which such award is earned.
The remaining 50% of the earned award will be deferred and
subject to vesting as set forth below.
The deferred amount will be paid in twelve equal installments
each of which is payable promptly following the end of any
month for which the AMEX reported closing price of Xxxxxxx
common stock on the last trading day of such month equaled or
exceeded the threshold share value which was originally
required to earn such deferred award; provided that any
deferred amounts not required to be paid with respect to
month-end closing prices prior to January 1, 2001 will be
forfeited. Notwithstanding the foregoing, 1/12th of the
deferred amount of any award earned in year eight will be
payable promptly following the end of any month during calendar
2001 for which the AMEX reported closing price of Xxxxxxx
common stock on the last trading day of such month equaled or
exceeded the threshold share value required to earn such
deferred award. Any deferred amount not required to be paid
with respect to 2001 month-end closing prices will be
forfeited.
Except as otherwise provided above, in no event will any award
be earned, nor will any deferred amount become payable with
respect to any share value reported after termination of
Xxxxxxxxx'x employment for any reason or after any acquisition
of Xxxxxxx.
All deferred awards outstanding on the date of an acquisition
of Xxxxxxx which are payable, based on a threshold share value
equal to or less than the transaction price, will be payable at
the closing of the acquisition.
All payments shall be in cash.
AMENDMENTS: No modification, waiver or amendment of any provision of this
Plan shall be effective unless approved in writing by the Board
of Directors; provided, however, that in the event such
modification, waiver or amendment would adversely affect a
participant, then the written consent of the participant shall
be required.
-3-
11
COMPLIANCE
WITH IRC
162(m): This Plan as amended and restated effective January 1, 1998 has
been approved by Gaylord's Compensation Committee and is
subject to approval by Gaylord's shareholders. Gaylord's
Compensation Committee satisfies the requirements of Section
162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as
amended, (the "Code"). No earned award hereunder will be
payable to Xxxxxxxxx unless and until this Plan as amended and
restated effective January 1, 1998 has been approved by a
majority of the votes of Gaylord's shareholders, as described
in Section 162(m)(4)(C)(ii) of the Code.
OTHER: All earned awards will be included as "incentive" in the
year paid for purposes of calculating benefits under the
Xxxxxxx Retirement Plan or any Supplemental Retirement
Agreement(s) in effect.
-4-
12
EXHIBIT B
SUPPLEMENTAL RETIREMENT PLAN
Pay History of
XXXXXX X. XXXXXXXXX
Calendar 1986 $527,500
" 1987 1,212,250
" 1988 988,350
" 1989 600,000
" 1990 600,000
" 1991 480,000
" 1992 480,000
" 1993 600,000
" 1994 1,282,000
" 1995 2,556,816
" 1996 879,546
