1
Exhibit 10.6
THE CIT GROUP, INC.
April 1, 1997
Xx. Xxxxxx X. Xxxxxx, Xx.
000 XXX Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Dear Al:
Reference is made to your employment agreement, dated December 29,
1989 (the "Employment Agreement"), with The CIT Group Holdings, Inc. (the
"Company"), as amended by letter agreements dated November 16, 1992 and December
20, 1994. The Board of Directors (the "Board") of The CIT Group Holdings, Inc.
(the "Company"), is pleased to extend your employment agreement with the Company
on the following terms and conditions, all other terms and conditions being null
and void:
1. TERM. This letter agreement will be effective as of April 1,
1997. The term of this Agreement (the "Term") will be for a period of
thirty-three months beginning on April 1, 1997 and, except as otherwise provided
in paragraph 4 below, ending on December 31, 1999. This letter agreement and the
Term may be extended for one or more additional periods as provided in paragraph
7 or by written agreement signed by you and the Company at any time prior to the
end of the Term then in effect.
2. DUTIES AND AUTHORITY. During the Term, you shall serve as the
Chief Executive Officer, President, Chairman of the Executive Committee and
member of the Board of the Company. Subject to the overall direction and control
of the Board, as Chief Executive Officer and President, you shall have general
charge and control of the business and affairs of the Company, which shall
include but shall not be limited to responsibility for overall policy making as
well as day-to-day operations (including hiring and firing of personnel,
establishing credit policy, personnel compensation and the nature and pricing of
the business of the Company). You agree to devote substantially all of your
business time and energies to the business of the Company and to faithfully,
diligently and competently perform your duties hereunder, except that you may
devote a reasonable amount of time to serving as a director of not-for-profit
institutions, and with the approval of the Board, of business corporations. You
shall not be assigned any duties that are inconsistent with your status as Chief
Executive Officer and President of the Company.
2
3. COMPENSATION AND BENEFITS. In full consideration for all services
rendered by you in all capacities during the Term, you will receive the
following compensation and benefits:
(a) BASE SALARY. An annual base salary of not less than the
amount you received immediately prior to the commencement of this current
employment agreement payable in accordance with the customary payroll practices
of the Company. Your Base Salary and performance will be reviewed by the Board
during the Term pursuant to normal Company practices. Your Base Salary may be
increased (but not reduced) by the Board from time to time, based upon your
performance and responsibilities, pursuant to the Company's standard procedures
for salary adjustments.
(b) BONUSES. You will participate in all executive bonus and
incentive compensation plans (collectively, "Incentive Plans") now or hereafter
maintained by the Company for which your level of employment makes you eligible
in accordance with the Company's policies and the terms of such Incentive Plans.
(c) EXPENSE REIMBURSEMENT. The Company will reimburse you for
your ordinary and necessary business and travel expenses incurred by you in the
performance of your duties. When traveling on Company business, you shall be
authorized for security reasons to travel on CIT's corporate aircraft or when
flying on commercial airlines, first class is authorized.
(d) OTHER BENEFITS. You will be eligible to participate in all
employee retirement and welfare benefit plans now or hereafter maintained by or
on behalf of the Company, including the Company's Executive Retirement Program
and receive all fringe benefits and vacations, for which your level of
employment makes you eligible in accordance with the Company's policies and the
terms of such plans. In addition, the Company will provide you with (i) a
supplemental pension benefit and (ii) a supplemental savings benefit, in each
case in an amount equal to the value of the benefit you would be entitled to
receive under the Company's Retirement Plan or Savings Incentive Plan, as the
case may be, but for the limitations on the amount of such benefits imposed by
Internal Revenue Code Sections 415 and 401(a)(17). In connection with your
benefits under the Company's Executive Retirement Program, the Company will not
unreasonably withhold its consent to your retirement.
(e) ADDITIONAL BENEFITS. In addition to the benefits described
above, the Company shall provide the following special benefits to you:
(1) Attorney and Accountant Expense Reimbursement. The
Company shall reimburse you for up to $25,000 annually for attorneys' fees and
disbursements incurred by you for tax advice or other legal counsel and for
accounting fees incurred by you for tax advice or other financial planning;
(2) Office and Staff. The Company shall provide you with
suitable offices located in northern New Jersey, and you shall not be required
to
-2-
3
relocate your residence from the New Jersey area. You may also employ
secretaries and assistants of your own selection as you deem appropriate or
necessary. The Company shall also provide you with a car and driver
substantially equivalent to that enjoyed by you under your past employment
agreement.
(3) Dues. The Company shall reimburse you for the full
cost (annual dues plus initiation fees) of one country club or luncheon club
membership of your choice; and
(4) Indemnification and Insurance. The Company will
provide you with suitable director's and officer's liability insurance to the
extent available on commercially reasonable terms. The Company shall not amend
the provisions of Article ELEVENTH and TWELFTH of its Restated Certificate of
Incorporation or Article X of its By-Laws in any manner adverse to you without
your consent.
(f) MODIFICATIONS. The Company may at any time or from time to
time amend, modify, suspend or terminate any bonus, incentive compensation or
other benefit plans or programs provided hereunder for any reason and without
your consent; provided that, without your consent, the Company may not reduce
the aggregate value of the benefits provided to the Executive hereunder, or
administer the Company Executive Retirement Program in a manner substantially
inconsistent with past practices.
4. TERMINATION OF THE EXECUTIVE'S EMPLOYMENT.
(a) BY THE COMPANY. The Board by majority vote may terminate
your employment in its sole discretion at any time during the Term, with or
without Cause, upon written notice by the Company to you, and your employment
will terminate on the date notice is given. For purposes of this letter
agreement, "Cause" means (A) your gross negligence, recklessness or malfeasance
in the performance of your duties hereunder, (B) your committing any criminal
act, act of fraud or other misconduct resulting or intending to result directly
or indirectly in gain or personal enrichment at the expense of the Company, or
(C) your willfully engaging in any conduct relating to the business of the
Company that could reasonably be expected to have a materially detrimental
effect on the business of financial condition of the Company. For purposes
hereof, you will be deemed to have committed an act if, based upon the Company's
investigation of the facts, the Board reasonably concludes that you committed
such an act.
(b) BY YOU. You may terminate your employment with the Company
at any time during the Term, with or without Good Reason, upon written notice by
you to the Company, and your employment will terminate on the date such notice
is given. For purposes of this letter agreement, "Good Reason" means the
assignment to you of duties and responsibilities not commensurate with your
status as Chief Executive Officer of the Company, the failure of the Company to
provide compensation and benefits to you at the levels required herein or the
failure of the Company to adhere in any substantial manner to any of its other
covenants herein. Termination of your
-3-
4
employment by you following the completion of a Change of Control contract
extension as provided in 7a will be deemed a "Good Reason" termination entitling
you to the benefits and payments covered in paragraph 5.
5. SEVERANCE PAYMENT.
(a) WITHOUT CAUSE AND GOOD REASON TERMINATION. If during the
Term the Company terminates your employment without Cause or you terminate your
employment for Good Reason, all compensation payable to you under paragraph 3
hereof will cease as of the effective date of notice of such termination (the
"Termination Date") and the Company will pay to you, subject to paragraph 6, the
following sums:
(1) Your Base Salary on the Termination Date for the
greater of 36 months or the remainder of the Term,
payable in 24 equal installments at the end of
each of the 24 months following the Termination
Date. If, however, prior to the second anniversary
of the Termination Date, you violate the
noncompetition provisions of paragraph 6(b)(A),
then the Company will have no obligation to make
any of the payments that remain payable by the
Company under this paragraph 5(a)(1) on or after
the date of such violation.
(2) All previously earned and accrued entitlements and
benefits from the Company, including any such
entitlements and benefits under the Company's
pension, disability and life insurance plans,
policies and programs.
(3) Full benefit coverage under all of the Company's
life insurance, health, disability, dental,
accidental death and dismemberment and other
employee welfare programs, plans and policies. In
the event that your participation in any such
employee welfare program, plan or policy is
barred, by law or otherwise, the Company shall at
its election arrange to provide you with benefits
substantially similar to those which you are
entitled to receive under such program, plan or
policy or the Company shall pay you the after-tax
economic equivalent thereof. For purposes of the
preceding sentence, after tax economic equivalent
shall be deemed to be the cost that would be
incurred by you in obtaining such
-4-
5
benefit at the lowest available individual basis.
The Company's obligation to provide benefit
coverage under such employee benefit programs,
plans and policies shall cease in the event that
you receive comparable coverage from any
subsequent employer.
(4) The reasonable costs of outplacement services,
including a fully equipped office and secretary to
be utilized by you for up to one year.
(5) Any awards due to you under the terms of the
Company's "Career Incentive Plan" (Long Term
Incentive) or any plan as may have been hereafter
adopted by the Company. Upon such payment, all of
your rights under all such plans will then
terminate.
(6) All benefits payable to you under the terms and
conditions of the company's Executive Benefits
Program, if any.
All of the amounts and benefits to be provided pursuant to clauses
(3), (4), (5) and (6) above shall be provided without duplication for the
amounts and benefits to be provided pursuant to clause (2) above.
(b) FOR CAUSE TERMINATION - OR TERMINATION BY YOU WITHOUT GOOD
REASON. If your employment is terminated by the Company for Cause or if you
terminate your employment for any reason other than Good Reason, you will
receive only the amounts specified in paragraph 5(a)(2). In the event you are
eligible under the terms and conditions of the Company's various executive
benefit plans, if any, you will also receive the benefits specified in paragraph
5(a)(6) provided you are not in breach of this Agreement.
(c) DEATH OR DISABILITY In the event of your death or your
disability due to physical or mental illness or other disability which renders
you unable, on other than a temporary basis, to perform the duties of your
employment, the Employment Term will terminate as of the date of your death or
disability and you will receive the benefits specified in paragraph 5(a)(2) and
(6) plus an amount equal to your Base Salary on such date for three years.
Disability will be determined by the Board in a manner consistent with the
Company's Long Term Disability Plan.
6. CONFIDENTIALITY AND COMPETITIVE ACTIVITY.
(a) You acknowledge that you have acquired and will continue
to acquire during the Term, confidential information regarding the business of
the Company, Dai-Ichi Kangyo Bank (DKB), Chase Manhattan Corporation (CMC) and
their respective subsidiaries and affiliates. Accordingly, you agree that,
without the written consent of the Board, you will not, at any time, disclose to
any unauthorized person or
-5-
6
otherwise use any such confidential information. For this purpose, confidential
information means non-public information concerning the financial data, business
strategies, product development (and proprietary product data), customer lists,
marketing plans, and other proprietary information concerning the Company, DKB
or CMC and their respective subsidiaries and affiliates, except for specific
items which have become publicly available other than as a result of your breach
of this letter agreement.
(b) During the Term and, if you resign with or without Good
Reason or your employment is terminated by the Company with or without Cause
prior to the end of the Term, or if the Term expires without renewal, then for
two years after the Termination Date, you will not, without the written consent
of the Board, directly or indirectly, (A) knowingly engage or be interested in
(as owner, partner, stockholder, employee, director, officer, agent, consultant
or otherwise), with or without compensation, any business in the United States
which is in competition with any line of business actively being conducted on
the Termination Date by the Company or any of its subsidiaries; provided that if
your employment has been terminated by the Company without Cause or you have
terminated your employment with the Company for Good Reason (except in the event
of a Change of Control), you may so compete from and after the six month
anniversary of the Termination Date in which event you shall forfeit your right
to receive future severance payments pursuant to paragraph 5(a)(1) hereof, and
(B) whether or not your termination of employment occurred without Cause or for
Good Reason, hire any person who was employed by the Company or any of its
subsidiaries or affiliates (other than persons employed in a clerical or other
non-professional position) within the six-month period preceding the date of
such hiring, or solicit, entice, persuade or induce any person or entity doing
business with the Company DKB or CMC and their respective subsidiaries and
affiliates, to terminate such relationship or to refrain from extending or
renewing the same. Nothing herein, however, will prohibit you from acquiring or
holding not more than one percent of any class of publicly traded securities of
any such business; provided that such securities entitle you to no more than one
percent of the total outstanding votes entitled to be cast by securityholders of
such business in matters on which such securityholders are entitled to vote.
Notwithstanding anything in the foregoing to the contrary, in the event of a
Change of Control, the provisions of clause (A) and clause (B) shall apply for
the two-year period following termination of your employment for any reason.
(c) REMEDY FOR BREACH. You hereby acknowledge that the
provisions of this paragraph 6 are reasonable and necessary for the protection
of the Company, DKB, CMC and their respective subsidiaries and affiliates. In
addition, you further acknowledge that the Company, DKB, CMC and their
respective subsidiaries and affiliates will be irrevocably damaged if such
covenants are not specifically enforced. Accordingly, you agree that, in
addition to any other relief to which the Company may be entitled, the Company
will be entitled to seek and obtain injunctive relief (without the requirement
of any bond) from a court of competent jurisdiction for the purposes of
restraining you from an actual or threatened breach of such covenants. In
addition, and without limiting the Company's other remedies, in the event of any
breach by you of such
-6-
7
covenants, the Company will have no obligation to pay any of the amounts that
remain payable by the Company under paragraph 5(a)(1).
7. CHANGE OF CONTROL.
(a) TERMINATION/CONTRACT EXTENSION. If during the Term, a
"Change of Control" occurs as defined hereafter, the Term of your employment
shall automatically be extended until the first anniversary date of such Change
of Control, provided however, that if such anniversary date occurs prior to
December 31, 1999, you may elect to serve out the remainder of your contract
term. In the event that you serve out the remainder of the current term
following a Change of Control, you may elect to terminate your employment at any
time during the period commencing with the first anniversary of Change of
Control and ending with the current contract termination date and have such
termination deemed "Good Reason" (except under Section 6(b) hereof) provided you
have given 90 days notice of termination.
(b) SPECIAL PAYMENT. In addition to the compensation and
benefits already required under the provisions of your Employment Agreement, if
a Change of Control should occur on or prior to December 31, 1999, you will
receive a special payment (the "Special Payment"). The amount of such Special
Payment shall equal the sum of your prior four years' annual bonuses under The
CIT Group Bonus Plan and will be payable over a one-year period as follows: 1/2
of the payment shall be paid to you within 30 days after the date of the Change
of Control; 1/2 shall be paid to you on or before the first anniversary date of
such Change of Control: Notwithstanding the foregoing provisions of this
paragraph, all or any part of such Special Payment shall not be payable to you:
if during the one-year period commencing on the date of a Change of Control, and
ending on the first anniversary of such date: (i) your employment is
involuntarily terminated by the Company for "Cause" as defined in the Employment
Agreement; (ii) you voluntarily terminate employment with the Company for any
reason other than "Good Reason" as defined in the Employment Agreement; or (iii)
you breach any non-competition or confidentiality covenant under Section 6 of
the Employment Agreement. For purposes of this Paragraph (b) "Special Payment",
a termination of your employment on account of your death, disability or
retirement on or after age 55 under the terms of the Company's retirement plan
(provided such is consistent with Section 7(a)) shall constitute a termination
for "Good Reason." In the absence of a separate beneficiary designation, your
beneficiary under the Group Life Insurance Plan will receive any Special Payment
remaining to be paid upon your death.
(c) CHANGE OF CONTROL DEFINED. For purposes of this letter
agreement, a "Change of Control" shall be deemed to have occurred if: (1) any
Person or Group other than DKB or CMC or their Affiliates becomes the Beneficial
Owner, directly or indirectly, of securities representing a majority of the
combined voting power of the Company's then outstanding securities generally
entitled to vote for the election of directors (capitalized terms not otherwise
defined herein are used as defined under the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated
-7-
8
thereunder); or (2) as a result of a cash tender offer, merger or other business
combination, sales of assets or contested election, or any combination of the
foregoing transactions (a "Transaction"), the persons who were directors of the
Company immediately before the Transaction shall cease to constitute a majority
of the Board of the Company or of any successor to the Company. Notwithstanding
the foregoing, a Change of Control resulting from a Change of Control of DKB or
CMC shall not require the extension of the Term hereunder.
8. MISCELLANEOUS.
(a) SURVIVAL; NOTICES. The obligations of the Company in
paragraph 5 and your obligations in paragraph 6 will survive the termination of
this letter agreement. Any notice, consent or other communication made or given
in connection with this letter agreement will be in writing and will be deemed
to have been duly given when delivered or five days after mailed by United
States registered or certified mail, return receipt requested, to the parties at
the address set forth on the first page of this letter agreement (attention:
General Counsel, if to the Company).
(b) ENTIRE AGREEMENT. This letter agreement supersedes any and
all existing agreements between you and the Company or any of its subsidiaries
or affiliates relating to the terms of your employment.
(c) AMENDMENTS AND WAIVERS. No provisions of this letter
agreement may be amended, modified, waived or discharged except as agreed to in
writing by you and the Company. The failure of a party to insist upon strict
adherence to any term of this letter agreement on any occasion will not be
considered a waiver thereof or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this letter
agreement.
(d) SUCCESSORS. This letter agreement shall be binding upon
and inure to the benefit of you and the Company and its successors and permitted
assigns. Neither this letter agreement nor any of the rights of the parties
hereunder may be assigned by either party hereto except that the Company may
assign its rights and obligations hereunder to a corporation or other entity
that acquires substantially all of its assets. Any assignment or transfer of
this letter agreement in violation of the foregoing provisions will be void.
(e) GOVERNING LAW. This letter agreement will be governed by
and construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in that State.
(f) LEGAL COUNSEL; OFFSETS AND REDUCTIONS. In the event you
obtain legal counsel to enforce your rights under this letter agreement, the
Company will pay you reasonable legal fees if you recover any amount on such
claim. Except as provided in paragraph 6, if your employment is terminated by
the Company, your
-8-
9
severance shall not be subject to any offsets or reductions for your
subsequently earned income or reduction by reason of any claim by the Company.
(g) SEVERABILITY. If the provision of this letter agreement is
invalid or unenforceable, the balance of this letter agreement will remain in
effect, and if such provision is inapplicable to any person or circumstance, it
will nevertheless remain applicable to all other persons and circumstances.
(h) WITHHOLDINGS. The Company is authorized to withhold from
any benefit provided or payment due hereunder the amount of withholding taxes
due any federal, state, or local authority in respect of such benefit or payment
and to take such other action as may be necessary in the opinion of the Company
to satisfy all obligations for the payment of such withholding taxes.
(i) TAX GROSS-UP. In the event that any payment made to you
pursuant to this employment agreement with The CIT Group Holdings, Inc. (the
"Company") becomes subject to excise taxes under Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company will pay to you the
amount of such excise taxes plus all federal, state and local taxes applicable
to the Company's payment of such excise taxes including any additional excise
taxes due under Section 4999 of the Code with respect to payments made pursuant
to this letter agreement.
The determination of amounts required to be paid under this letter agreement
shall be made by an independent auditor selected and paid by the Company. Such
independent auditor shall be a nationally recognized United States public
accounting firm, which may be the independent accounting firm used by the
Company to audit its financial statements.
If you are in agreement with the terms of this letter, please so
indicate by signing and returning the enclosed copy of this letter, whereupon
this letter shall constitute a binding agreement between you and the Company.
Very truly yours,
THE CIT GROUP HOLDINGS, INC.
By: ___________________________
Name:
Title:
Agreed:
__________________________________
-9-
