EXHIBIT 10(w)
As of December 31, 1997
Xx. Xxxxxxx X. Xxxxxxx
0000 Xxxxx Xxxx Xxxxx Xxxxx
Xxxx 00-0/0 X
Xxxxxxx, Xxxxxxxx 00000
Dear Dick:
The following is a Letter Agreement detailing the terms and conditions of
your employment as Chief Executive Officer and Chairman of the Board of Xxxxxx
Financial, Inc. after December 31, 1997, the expiration of the term of your
employment as Chief Executive Officer of Xxxxxx International Corporation
("HIC") pursuant to the letter agreement between you and HIC dated February 1,
1996.
LETTER AGREEMENT
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Xxxxxx Financial, Inc. (hereinafter sometimes referred to as the "Company" or
"Xxxxxx") agrees to employ you as Chairman of its Board of Directors and its
Chief Executive Officer effective as of January 1, 1998, and you agree to accept
such employment under the terms and conditions provided in this Letter
Agreement. In this capacity, you shall have the usual powers and duties vested
in the office of the Chairman of the Board of Directors and Chief Executive
Officer of a corporation of the size, stature, and nature of the Company.
Consistent with and subject to the ultimate authority which reposes in the Board
of Directors of the Company, you will have full authority over and the
responsibility for overall policy making and for the day-to-day operations of
the Company. In addition to the foregoing authorities and responsibilities, you
also may be given additional authority and/or responsibility as deemed
appropriate by the Board of Directors of the Company.
The terms and conditions of your employment are specified below:
1. Subject to the provisions of Paragraph 7 the term of your employment
hereunder (the "Employment Term") shall commence on January 1, 1998 and
terminate on December 31, 1999 provided that unless either you or the
Company shall, on or before June 30, 1999, have given the other written
notice to the contrary your employment hereunder shall be automatically
extended to December 31, 2000. Your base salary for the period from
January 1, 1998 through December 31, 1998 shall be $750,000. Your salary
for periods subsequent to December 31, 1998 shall be reviewed annually and
may be increased by the Company but, except as provided in Paragraph 7 of
this Letter Agreement, your salary will not be reduced below the level
stated in this Paragraph during the Employment Term.
2. Except as may otherwise be approved in advance by the Chairman of the
Executive Committee of the Company (the "CEC") and except for services as
an Outside Director approved in advance by the CEC, during the Employment
Term you will devote your full
business time, attention and best efforts to the performance of your duties
under this Letter Agreement.
3. Assuming continued employment, you will be a participant in the Company's
Annual Incentive Plan (referred to herein as the "Annual Incentive Plan")
or whatever other incentive plan is established in place of the Annual
Incentive Plan for the calendar years 1998 and 1999 at a target bonus of
60% of salary, and your Annual Incentive Plan bonus from the Annual
Incentive Plan or its successor plan will be no less than $200,000 per year
regardless of the achievement of objectives. In calculating your bonus
under the Annual Incentive Plan unless otherwise agreed by you and the
Company prior to March 4 of any plan year the financial measurements as
determined annually for the Annual Incentive Plan as such measurements are
specified in an annual Side Letter Agreement and applicable to all
participants in the Annual Incentive Plan (which for the 1997 plan year
were, Net Income, Return on Assets, and the Ratio of Non-Earning Assets,
weighted 50%, 10% and 20%, respectively) and two non-financial
measurements, "strategic advancement" and "contribution to Fuji Group" each
as determined by the CEC and each with a 10% weight will be used. The
specific target numbers for the three financial measurements will be the
corresponding numbers established in the Company's budgets for the Annual
Incentive Plan for such years as approved by the Company's Board of
Directors.
4. You have been granted participations in the HFI Long Term Incentive Plan
(the "Long Term Incentive Plan") for the 1996-1998 and 1997-1999 periods
under such Plan (each a "Plan Period") of 4,060 and 4,375 shares,
respectively. Any participations in the Long Term Incentive Plan (or any
successor plan) for the 1998-2000 or subsequent periods will be granted
separately but shall not be at levels such that the projected value of the
benefit thereunder (assuming the targeted performance levels are met) is
less than the projected benefits (on the same assumption) for prior cycles
under the Long Term Incentive Plan (or any successor plan).
The value of each of such shares shall be paid to you or your estate
if you are employed by HFI as of the end of each Plan Period in cash as
promptly as practicable after the determination of HFI's return on equity
for the years ending December 31, 1998 and December 31, 1999, respectively,
and shall be determined as provided in a separate letter agreement between
you and HFI.
Notwithstanding anything to the contrary herein or in the terms of the Long
Term Incentive Plan
(a) You are guaranteed, subject to the terms of (b) and (c) below, a
payment (without duplication) for each year included in each Plan
Period of no less than $150,000.
(b) In the event your employment by the Company terminates prior to
December 31, 1999 because of your death, a resignation by you under
the circumstances contemplated by clause 2 of subparagraph (b) of
Paragraph 7, termination by the Company without "cause" as defined in
subparagraph (c) of Paragraph 7 or permanent disability, payments will
be made as promptly as practicable following the determination of the
Company's return on equity for the year in which (or as of the end of
which) such termination has occurred applying the criteria and
mechanics specified in the separate letter agreement referred to above
to the portion of the relevant Plan Period elapsed through the date of
such termination.
(c) If your employment is terminated by the Company for "cause" as defined
in subparagraph (c) of Paragraph 7 or if you terminate your employment
with the Company for any reason other than under the circumstances
contemplated by clause 2 of subparagraph (b) of such Paragraph 7 you
will be deemed to have forfeited any rights to receive any
compensation under the Long Term Incentive Plan (other than amounts
due but not yet paid).
5. You will continue so long as you are employed by the Company to be eligible
for the executive perquisites outlined in the Company's policies as in
effect as of the date hereof. Your annual allowance for financial
counseling, tax and financial legal assistance will be $10,000. In
addition, on a one-time basis, your expenses associated with the legal
review of this Letter Agreement will be paid up to $5,000. Costs
including, but not limited to, normal monthly dues and special assessments
relating to your membership in a suitable country club or tennis club of
your choosing will be borne by the Company.
6. You will continue to be covered under all Xxxxxx health, welfare, and
pension programs including the "excess IRS" supplemental coverage to which
you are now entitled. You will continue to receive credit for vesting
purposes under the Company's Retirement Plan for your years of service with
Citicorp. You will also receive a supplemental pension under the
"Supplemental Executive Retirement Plan" which, together with the benefits
you are entitled to receive under the Company's retirement plan, provides
you with a benefit equivalent to the amount you would have received under
the Company's retirement plan without regard to the annual retirement
benefit limitations of Sections 401(a)(17) and 415 of the Internal Revenue
Code, as amended from time to time.
7. (a) Your employment will terminate hereunder in the event of your death or
"permanent disability" (as defined below) during the Employment Term.
In the event of such termination, the Company shall pay to you or your
legal representatives (as applicable) all amounts and benefits which
have accrued through the date of such termination but which have not
been paid out (other than payments under the Long Term Incentive
Plan), including, but not limited to, amounts accrued as of the date
of such termination under the Annual Incentive Plan. In the event of a
termination of your employment pursuant to this subparagraph (a) in
the midst of a plan year, payments will be based upon performance for
the entire year, prorated based upon days to the date of termination
(but in no event less than a similarly prorated portion of your
minimum guarantee). Such amounts shall be paid in a lump sum to you or
to your estate or beneficiary (as applicable) within 45 days of the
end of the year of such termination. For purposes of this Letter
Agreement "permanent disability" shall mean a "total disability" (as
such term is defined in the Company's Long-Term Disability Plan) which
total disability shall exist for any continuous period of 180 days.
Termination of your employment hereunder pursuant to this subparagraph
(a) shall be deemed to occur on the date of your death or on a date
specified by the Company in a written notice to you stating that the
Company has determined (pursuant to the terms of the Company's Long-
Term Disability Plan) that you have become permanently disabled.
(b) Your employment may be terminated at any time by either you or the
Company, upon a date specified in a written notice of such termination
given to the other. If (1) your employment is terminated by the
Company at its election for any reason other than for "cause", as
defined in subparagraph (c) below, or (2) your employment is
terminated by you at your election either (A) because there has been a
significant diminution of your assigned duties and responsibilities
including,
without limitation, any removal of your titles as either Chairman of
the Board or Chief Executive Officer or any material diminution of the
powers associated with either of such positions or (B) within 180 days
after any date upon which The Fuji Bank Limited and its subsidiaries
shall cease to own at least fifty percent voting control of the
Company provided that in the case of a termination by you pursuant to
subclause (A) of this clause (2) you have delivered written notice to
the Company specifying the diminution in your assigned duties which
you believe justifies such termination and the Company shall have
failed to reverse the same or to take all reasonable steps to that end
within 30 days of its receipt of such notice, then the Company will
pay you severance benefits consisting of all of the following:
(i) Amounts equal to your salary in effect at the time of your
termination through the date twenty-four months from the date
of such termination at the same times and in the same manner as
your salary was paid during your employment (including the
right to defer such amounts under any deferred compensation
program covering you) or, at your election in a single lump
sum.
(ii) For the year in which your employment is terminated, you will
receive an Annual Incentive Plan bonus at the applicable target
bonus level for the full year in which such termination occurs.
Such bonus shall be paid in a lump sum within 45 days of the
end of the year of such termination. If termination occurs on
or prior to December 31 of any year, you will not be eligible
for an Annual Incentive Plan bonus for any subsequent year.
(iii) You will continue to be covered for all allowable health and
welfare benefits through the date twenty-four months from the
date of such termination and you will receive a lump sum
payment equivalent to the present value (as reasonably
determined by the Company) of the additional benefit which you
would have accrued under the Company's retirement plans had you
continued to receive benefits thereunder from the date of
termination through the last day of the benefit continuation
period described in this clause (iii).
(c) For purposes of this Letter Agreement, termination of your employment
by the Company shall be deemed to have been for "cause" only
(i) if such termination shall have been the result of fraud or
criminal conduct on your part which is materially injurious to
the financial condition or business reputation of the Company or
any of its subsidiaries or affiliates; or
(ii) if there has been a material and willful breach on your part of
your responsibilities or a willful failure to comply with
reasonable directives or policies of the Company's Board of
Directors; but, in each case, only if you shall have received
written notice from the Company specifying the breach or failure
to comply complained of, demanding that you remedy such breach
or failure to comply and affording you an opportunity to be
heard in connection therewith, and you either shall have failed
to remedy such alleged breach or failed to comply within 30 days
from your receipt of such written notice or shall have failed to
take all reasonable steps to that end during such 30-day period
and thereafter.
(d) (1) If your employment is terminated "for cause" as defined in
subparagraph (c) above, you will immediately be deemed to have
forfeited the right to receive any payment or benefits not paid prior
to the date of such termination (other than accrued and unpaid salary
and any prior year's Annual Incentive Plan bonus earned but not yet
paid) and coverage (including, without limitation, future accrual of
service credit) under all pension and other benefit plans and all
perquisites shall cease immediately.
(2) If you terminate your employment hereunder for any reason other
than under the circumstances specified in clause 2 of subparagraph
(b), (A) you will immediately be deemed to have forfeited: (i) the
right to receive any payment under (x) the Annual Incentive Plan
(other than amounts accrued but not yet paid) and (y) any long term
incentive plan in which you participate at the time (other than any
amounts due in accordance with the terms of such plan but not yet
paid), in each case as in effect at the date of any such termination;
and (ii) salary under Paragraph 1 above and perquisites under
Paragraph 5 above for any periods subsequent to the date of such
termination; and (B) coverage (including, without limitation, future
accrual of service credit) under all pension and other benefit plans
shall cease immediately.
(e) Notwithstanding any other term of this Agreement to the contrary, upon
termination of your employment for any reason, (a) you shall in all
events receive, when such amounts would otherwise be then due and
owning, (i) all amounts accrued under the Executive Deferral
Compensation Plan, (ii) all statutory rights to receive or purchase
welfare benefits, (iii) reimbursement for unreimbursed expenses in
accordance with the policies of the Company in effect as of the date
of such termination, (iv) accrued vacation pay, (v) earned pension
benefits in accordance with the applicable terms of the governing
plans, and (vi) all vested monies in 401(k) or other defined
contribution plans in accordance with the applicable terms of the
governing plans; and (b) to the extent applicable law or the general
terms of any defined contribution or benefit plan prohibits the
provision of any benefit, the Company's obligation to provide such
benefit shall cease.
(f) In the event of a termination of your employment for any reason
payments to you or your estate under the Long Term Incentive Plan will
be determined and made in accordance with the provisions of Paragraph
4.
8. With respect to any dispute or controversy arising under or in connection
with this Letter Agreement, the parties agree that any such dispute shall
be submitted to and determined by arbitration in Chicago, Illinois, in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and the parties agree to be bound by the decision
in any such arbitration proceeding.
9. Except as specifically provided in Paragraphs 3 and 4 above, the terms of
any of Xxxxxx'x benefit plans and incentive plans referred to in this
Letter Agreement may be changed by the Board of Directors or any of its
committees and such changes shall not be deemed to be a breach of this
Letter Agreement, except that (i) no such change shall adversely affect any
benefit accrued by you at or prior to the date of such change and (ii) no
such change shall reduce your health, welfare or pension benefits, unless
such changes are applicable to all the Company's employees.
10. The validity, interpretation, construction and performance of this Letter
Agreement shall be governed by the laws of the State of Illinois.
If you are in accord with the foregoing, please so indicate by
countersigning and returning the enclosed copy of this letter.
Very truly yours,
XXXXXX FINANCIAL, INC.
By: /s/ X. Xxxxxx
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Xxxxxxx Xxxxxx
Agreed:
/s/ X. X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
