XXXXX(R)
XXXXXX X. XXXXXX
President & Chief Executive
Officer
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
As of December 11, 2000
Xx. Xxxxxx Xxxxxxx
000 Xxxxxx Xxx
Xxxxxx Xxxxxx, XX
00000
Dear Xxx:
On behalf of Xxxxx Corporation Limited (the "Company"), we are all
extremely pleased that you have agreed to serve as the Executive Vice President,
Treasurer (the "EVP, Treasurer") of the Company, effective as of the closing of
the purchase of the Company's securities (the "Purchase") by Chancery Lane/GSC,
L.P. (which is expected to occur on or about December 21, 2000), in accordance
with the provisions of this letter agreement (the "Agreement"), which governs
the terms of your employment. You will as of the date hereof in any event become
a nonexecutive employee of the Company's subsidiary Xxxxx U.S.A. Inc. ("MUSAI").
Furthermore, the Company shall have the right to assign its obligations under
this Agreement to MUSAI and treat you as an employee of MUSAI, except for
actions you take as an officer of the Company and you shall remain EVP,
Treasurer of the Company. We and you hereby acknowledge that your employment
with the Company and MUSAI constitutes "at-will" employment and that either
party may terminate this Agreement at any time, upon written notice of
termination within a reasonable period of time before the effective date of the
termination. With respect to the terms of your employment with the Company, you
will have the customary duties, responsibilities and authorities of an executive
vice president, treasurer at a corporation of a similar size and nature. You
will report to the Chief Executive Officer of the Company (the "CEO").
I. COMPENSATION
------------
You will receive the following compensation and benefits, from which the
Company may withhold any amounts required by applicable law:
(i) The Company will pay you a base salary ("Base Salary") at the rate
of U.S. $275,000 per year. This Base Salary will be paid in accordance with
the normal payroll practices of the Company.
(ii) The Company will pay you an annual bonus (the "Annual Bonus") of
up to 100% Base Salary in respect of each fiscal year of the Company in
accordance with the Company's annual incentive compensation plan if the
Company achieves the following performance objectives set forth by the
board of directors of the Company (the "Board") (or any designated
committee thereof) from time to time: (A) meeting or exceeding established
EPS target, (B) meeting or exceeding established EBITDA target, and (C)
meeting or exceeding your individual performance objectives. The Annual
Bonus shall be approved by the CEO and the Board and shall be paid on an
all-or-nothing basis, provided, however, that with respect to the Company's
2001 fiscal year (which begins on January 1, 2001 and ends on December 31,
2001), your Annual Bonus will be at least equal to U.S. $275,000.
(iii) In addition, you will be immediately eligible to participate in
any nonqualified pension plans (with no waiting period) and qualified
plans, if any (subject to applicable waiting periods), in which the senior
executive officers of the Company customarily participate. The Company will
compensate you for any benefit that you may have earned in a qualified plan
where the applicable waiting period causes you not to begin receiving
benefits immediately, as if you had met the waiting period eligibility.
(iv) Further, with respect to any relocation expenses you may incur
relating to the commencement of your employment with the Company in the
United States Corporate Headquarters, the Company will reimburse you for
all such reasonable expenses. Such expenses will be reimbursed upon
presentation by you from time to time of appropriately itemized and
approved (consistent with the Company's policy) accounts of such
expenditures.
II. SEVERANCE; CHANGE OF CONTROL
----------------------------
If the Company terminates your employment as EVP, Treasurer without Cause,
as defined in Annex A, or if you terminate your employment for Good Reason, as
defined in Annex A, whether the same occurs before or following a Change of
Control (as defined in Annex A), the Company will pay you in a cash lump sum, an
amount equal to one (1) times your Annualized Total Compensation (as defined
below), subject to the execution by you of a customary release. The Company will
also provide to you a continuation of all benefits, including automobile and
other related benefits, if any, which you were
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eligible to receive immediately prior to such termination, for a period of
twelve (12) months following the date of such termination. Your rights of
indemnification under the Company's and XXXXX's organizational documents, any
plan or agreement at law or otherwise and your rights thereunder to director's
and officer's liability insurance coverage for, in both cases, actions as an
officer and director of the Company and its affiliates shall survive any
termination of your employment. "Annualized Total Compensation" means Base
Salary plus Annual Bonus (as if all necessary targets and objectives were met)
for one year at the rate in effect immediately before termination. In addition,
all outstanding stock options, grants, restricted stock awards or other equity
grants issued to you will vest 100% immediately prior to the Change of Control
becoming effective. The payments under this paragraph are in lieu of any notice
requirements of any Canadian national or provincial law. In the event of any
termination, you agree to resign as an officer and director of the Company and
its affiliates.
III. INDUCEMENT OPTIONS
------------------
In addition, effective immediately, you will be granted options (the
"Initial Grant") to purchase an aggregate of 100,000 non-voting preference
shares (the "Preference Shares") to be issued by the Company and having the
terms set forth in Annex B. The Company represents and warrants that all
necessary corporate action has been taken to authorize the Preference Shares and
their issuance. Each year, during the ordinary course of business and based upon
individual performance, you will also be considered by the Board or the
applicable committee thereof to receive options to purchase common shares of the
Company under the Company's stock option plan. The Initial Grant options will
vest 25 percent over four years, beginning on January 3, 2002 and then on each
succeeding anniversary of the date the options are granted provided you are then
employed. The Initial Grant options will be fully vested on January 3, 2005, so
long as you are still employed by the Company at such time.
You agree (i) that at all times both during and (subject to your receiving
full severance payments as outlined above) after your employment, you will
respect the confidentiality of Company's and its affiliates' confidential
information and will not disparage the Company and its affiliates or their
officers, directors or employees, and (ii) during your employment and (subject
to your receiving full severance payments as outlined above) for one (1) year
thereafter, you will not (a) accept a position with, or provide material
services to, an entity that competes with a portion of the Company's business
representing more than 15% of the Company's revenues on the date of your
departure, (b) solicit or hire, or assist others in the solicitation or hiring
of, the Company's employees or (c) interfere with the Company's business
relationships with any material customers or suppliers.
All notices or communications under this Agreement must be in writing,
addressed; (i) if to the Company, to the Chief Executive's attention at the
Company's address first written above and (ii) if to you, at your address first
written above (or to any other addresses as either party may designate in a
notice duly delivered as described in
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this paragraph). Any notice or communication shall be delivered by telecopy, by
hand or by courier. Notices and communications may also be sent by certified or
registered mail, return receipt requested, postage prepaid, addressed as above
and the third business day after the actual date of mailing shall constitute the
time at which notice was given.
Any controversy or claim arising out of or relating to this Agreement or
the breach of this Agreement that cannot be resolved by you and the Company,
including any dispute as to the calculation of any payments hereunder, and the
terms of this Agreement, shall be determined by a single arbitrator in
Connecticut, in accordance with the rules of the American Arbitration
Association. The decision of the arbitrator shall be final and binding and may
be entered in any court of competent jurisdiction. The arbitrator may award the
party he determines has prevailed in the arbitration any legal fees and other
fees and expenses which may be incurred in respect of enforcing its respective
rights under this Agreement. This Agreement shall be interpreted in accordance
with the laws of Connecticut.
This Agreement may be executed in counterparts. This Agreement is our full
agreement and may not be modified or terminated orally.
If the foregoing terms and conditions are acceptable and agreed to by you,
please sign on the line provided below to signify such acceptance and agreement
and return the executed copy to the undersigned.
XXXXX CORPORATION LIMITED
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name:
Title:
Accepted and Agreed as of this 11th day of December, 2000
/s/ Xxxxxx Xxxxxxx
-------------------------
Xxxxxx Xxxxxxx
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ANNEX A
DEFINITIONS
a. "CAUSE" means (i) the willful and continued failure of Executive to
perform substantially his duties with the Company (other than any such failure
resulting from Executive's incapacity due to physical or mental illness or any
such failure subsequent to Executive being delivered a notice of termination
without Cause by the Company or delivering a notice of termination for Good
Reason to the Company) after a written demand for substantial performance is
delivered to Executive by the Board which specifically identifies the manner in
which the Board believes that Executive has not substantially performed
Executive's duties, (ii) the willful engaging by Executive in illegal conduct or
misconduct which is demonstrably and materially injurious (monetarily or
otherwise) to the Company or its affiliates, (iii) any misappropriation, fraud
or breach of fiduciary duty with regard to the Company or its affiliates or any
of the assets of the Company or its affiliates (other than good faith expense
account disputes), (iv) conviction of or the pleading of nolo contendere with
regard to, a felony or any crime involving fraud, dishonesty or moral turpitude,
or (v) refusal or failure to attempt in good faith to follow the written
direction of the Board promptly upon receipt of such written direction. A
termination for Cause after a Change of Control shall be based only on events
occurring after such Change of Control; provided, however, the foregoing
limitation shall not apply to an event constituting Cause which was not
discovered by the Company prior to a Change of Control. For purpose of this
paragraph (b), no act or failure to act by Executive shall be considered
"willful" unless done or omitted to be done by Executive in bad faith and
without reasonable belief that Executive's action or omission was in the best
interests of the Company or its affiliates. Any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the Board, based
upon the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by Executive in good faith and in the best
interests of the Company. Cause shall not exist unless and until the Company has
delivered to Executive a copy of a resolution duly adopted by three-quarters
(3/4) of the entire Board (excluding Executive if Executive is a Board member)
at a meeting of the Board called and held for such purpose (after reasonable
notice to Executive and an opportunity for Executive, together with counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
an event set forth in clauses (i) or (ii) has occurred and specifying the
particulars thereof in detail, provided that the Company may suspend the
Executive with pay (without it being Good Reason) pending such meeting. The
Company must notify Executive of any event constituting Cause within ninety (90)
days following the Company's knowledge of its existence or such event shall not
constitute Cause under this Agreement.
b. "CHANGE IN CONTROL" means the occurrence of any one of the following
events:
(i) individuals who, on the date of this Agreement, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
pursuant to the Debenture Purchase Agreement of December 11, 2000, between
Xxxxx
ANNEX A
Corporation Limited and Chancery Lane/GSC Investors, L.P., or subsequent to
the date of this Agreement, whose election or nomination for election was
approved by a vote of at least two-thirds of the Incumbent Directors then
on the Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a result of any
other actual or threatened solicitation of proxies or consents by or on
behalf of any person other than the Board shall be deemed to be an
Incumbent Director;
(ii) any "person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board (the "Company
Voting Securities"); provided, however, that the event described in this
paragraph (ii) shall not be deemed to be a Change in Control by virtue of
any of the following acquisitions: (A) by the Company or any subsidiary,
(B) by any employee benefit plan (or related trust) sponsored or maintained
by the Company or any subsidiary, (C) by any underwriter temporarily
holding securities pursuant to an offering of such securities, (D) pursuant
to a Non-Qualifying Transaction (as defined in paragraph (iii)), (E)
pursuant to any acquisition or ownership by Xxxxxx X. Xxxxxx ("Xxxxxx") or
any group of persons including Xxxxxx (or any entity controlled by Xxxxxx
or any group of persons including Xxxxxx), or (F) pursuant to an
acquisition or ownership by Xxx Xxxxx or Greenwich Street Capital Partners
or any group of persons including Xxx Xxxxx or Greenwich Street Capital
Partners (or any entity controlled by Xxx Xxxxx or Greenwich Street Capital
Partners or any group of persons including Xxx Xxxxx or Greenwich Street
Capital Partners);
(iii) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or
any of its Subsidiaries that requires the approval of the Company's
stockholders, whether for such transaction or the issuance of securities in
the transaction (a "Business Combination"), unless immediately following
such Business Combination: (A) more than 50% of the total voting power of
(x) the corporation resulting from such Business Combination (the
"Surviving Corporation"), or (y) if applicable, the ultimate parent
corporation that directly or indirectly has beneficial ownership of 100% of
the voting securities eligible to elect directors of the Surviving
Corporation (the "Parent Corporation"), is represented by Company Voting
Securities that were outstanding immediately prior to such Business
Combination (or, if applicable, is represented by shares into which such
Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company
ANNEX A
Voting Securities among the holders thereof immediately prior to the
Business Combination, (B) no person (other than any employee benefit plan
(or related trust) sponsored or maintained by the Surviving Corporation or
the Parent Corporation), is or becomes the beneficial owner, directly or
indirectly, of 25% or more of the total voting power of the outstanding
voting securities eligible to elect directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving Corporation) other
than persons set forth in (A) through (F) of paragraph (ii) and (C) at
least a majority of the members of the board of directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) following the consummation of the Business Combination were
Incumbent Directors at the time of the Board's approval of the execution of
the initial agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (A), (B) and
(C) above shall be deemed to be a "Non-Qualifying Transaction");
(iv) the closing of a sale of all or substantially all of the
Company's assets, other than to an entity or in a manner where the voting
securities immediately prior to such sale represent directly or indirectly
after such sale at least 50% of the voting securities of the entity
acquiring such assets in approximately the same proportion as prior to such
sale; or
(v) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control of the Company shall not
be deemed to occur solely because any person acquires beneficial ownership of
more than 25% of the Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the Company
shall then occur.
c. "GOOD REASON" means, without Executive's express written consent, the
occurrence of any of the following events:
(i) the assignment to Executive of any duties or responsibilities
(including reporting responsibilities) that is inconsistent in any material
and adverse respect with Executive's position(s), duties, responsibilities
or status with the Company or any material and adverse diminution of such
duties or responsibilities (other than temporarily while incapacitated
because of physical or
ANNEX A
mental illness) or (B) a material and adverse change in Executive's titles
or offices (including, if applicable, membership on the Board) with the
Company;
(ii) a reduction by the Company in Executive's rate of annual base
salary or annual target bonus opportunity (including any material and
adverse change in the formula for such annual bonus target) as the same may
be increased from time to time thereafter;
(iii) any requirement of the Company that Executive (A) be based
anywhere more than fifty (50) miles from the office where the Chief
Executive Officer establishes the United States executive offices of the
Company, it being recognized that Executive will also have an office in the
Toronto area of Canada;
(iv) any material breach of the Agreement by the Company.
Notwithstanding the foregoing, a Good Reason event shall not be deemed to
have occurred if the Company cures such action, failure or breach within ten
(10) days after receipt of notice thereof given by Executive. Executive's right
to terminate employment for Good Reason shall not be affected by Executive's
incapacities due to mental or physical illness and Executive's continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any event or condition constituting Good Reason; provided, however, that
Executive must provide notice of termination of employment within ninety (90)
days following Executive's knowledge of an event constituting Good Reason or
such event shall not constitute Good Reason under this Agreement.
ANNEX B
PREFERENCE SHARES TERM SHEET
ISSUER: The Company.
DIVIDENDS: Each Preference Share will be entitled to a non-
cumulative preferential annual dividend of Cdn
$.001, payable annually from and after the date of
issuance, and also shall receive any dividend paid
on a Common Share.
LIQUIDATION PREFERENCE: Upon the liquidation and winding up of the
corporation, each Preference Share will be entitled
to a distribution from the Company's assets (in
preference to any distribution being made on the
Common Shares) of Cdn $.001 and thereafter shall
participate on a share-for-share basis with the
Common Shares.
VOTING RIGHTS: The Preference Shares will be non-voting; the holder
will irrevocably waive any class voting rights which
may be waived under applicable law and will
otherwise irrevocably agree to exercise any
remaining class voting rights in accordance with the
recommendation of the Board.
TRANSFER: Neither the options received in the Initial Grant
(the "Options"), nor the Preference Shares received
upon exercise thereof, will be transferable by the
holder.
EXERCISE PRICE: The Options will have an exercise price or Cdn. $___
per share (the "Exercise Price").
CASH-OUT RIGHT: The Options will contain a cash-out provision
permitting the holder to receive, at his election
and in lieu of the delivery of Preference Shares, an
amount with respect to each Preference Share equal
to the positive difference between the Current
Market Value per Preference Share (as defined below)
and the Exercise Price; the Current Market Value per
Preference Share shall be equal to the closing price
per Common Share on the trading day immediately
prior to exercise on the principal stock exchange
(which shall be the Toronto Stock Exchange as long
as the Common Shares are listed
ANNEX B
thereon) on which the Common Shares are then listed,
or if not so listed, shall be conclusively deemed to
be equal to the closing price of a Common Share as
is applicable under the Company's customary form of
option grant and the plans relating thereto.
ANTI-DILUTION PROTECTIONS: The Options will be subject to anti-dilution and
similar adjustments under the circumstances provided
in the Company's customary form of option grant
agreement and the plans relating thereto.
CONVERSION TO NON-VOTING In the event that, at the time of exercise of an
COMMON: Option, the holder of an Option elects to receive
Preference Shares and the Company then has an
authorized class of non-voting common shares, the
Preference Shares issued upon the exercise of an
Option shall automatically convert into such class
of non-voting shares (on a share-for-share basis)
immediately upon such exercise (and in such event,
the cash-out provision described above shall not be
applicable with respect to the non-voting Common
Shares delivered).
EXPIRATION: Each Option will expire immediately prior to the
tenth anniversary of the date of the grant thereof
or under the circumstances relating to expiration
upon a separation of employment provided in the
Company's customary form of option grant agreement
and the plans relating thereto.
