Exhibit 10.12
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (the
“Agreement”), dated as of December 30, 2005
between Henry R. Baughman (the “Executive”) and SGS
International, Inc., a Delaware corporation (the
“Company”), recites and provides as follows:
WHEREAS, the Board of Directors of
the Company (the “ Board ”) and the Executive
wish to set forth the terms of Executive’s employment with
the Company; and
NOW, THEREFORE, in consideration of
the foregoing premises and the mutual covenants herein, the receipt
and sufficiency of which are hereby acknowledged by each of the
parties, the Company and the Executive agree as follows:
1. Employment
.
(a) Position . On the terms
and subject to the conditions set forth herein, the Company agrees
to employ the Executive as Chief Executive Officer throughout the
Employment Term (as defined below). At the request of the Board and
without additional compensation, the Executive shall also serve as
an officer and/or director of any or all of the subsidiaries of the
Company.
(b) Duties and
Responsibilities . The Executive shall have such duties and
responsibilities that are consistent with the Executive’s
position as the Board determines and shall perform such duties and
carry out such responsibilities to the best of the
Executive’s ability for the purpose of advancing the business
of the Company and its subsidiaries. Subject to the provisions of
Section 1(c) below, during the Employment Term the Executive shall
devote the Executive’s full business time, skill and
attention to the business of the Company and its subsidiaries, and,
except as specifically approved by the Board, shall not engage in
any other business activity or have any other business
affiliation.
(c) Other Activities .
Anything in this Agreement to the contrary notwithstanding, as part
of the Executive’s business efforts and duties on behalf of
the Company, the Executive may participate in social, charitable
and civic activities, and, if specifically approved by the Board,
the Executive may serve on the boards of directors of other
companies, provided that such activities do not unreasonably
interfere with the performance of and do not involve a conflict of
interest with the Executive’s duties or responsibilities
hereunder.
2. Employment Term .
The “Employment Term” hereunder shall commence on the
date set forth above and shall continue in full force and effect
until the third (3rd) anniversary of the date hereof unless
terminated earlier pursuant to the terms and conditions of this
Agreement. The Employment Term will renew hereunder automatically
for successive one-year periods unless either party gives written
notice to the other not less than ninety (90) days prior to
the end of Employment Term hereof (or any subsequent anniversary,
as the case may be) that such party does not wish the Employment
Term to be so extended, and under such circumstances, the
Employment Term and this Agreement will terminate by its terms, and
without liability to either party, on the fourth anniversary of the
date hereof (or such subsequent anniversary, as the case may
be).
3. Compensation .
During the Employment Term, the Company will pay and/or otherwise
provide the Executive with compensation and related benefits as
follows:
(a) Base Salary . The Company
agrees to pay the Executive, for services rendered hereunder, an
initial base salary at the annual rate of $241,440 (the “
Base Salary ”). Base Salary will be reviewed annually
throughout the Employment Term by the Board or the Compensation
Committee of the Board. The Base Salary shall be payable in equal
periodic installments, less any sums which may be required to be
deducted or withheld under applicable provisions of law. The Base
Salary for any partial year shall be prorated based upon the number
of days elapsed in such year.
(b) Bonus Plans . The
Executive shall be eligible to participate in the Company’s
bonus plans for senior management with an annual incentive target
of fifty percent (50%) of Base Salary (“ Incentive
Payment ”), subject to achievement of such
program’s objectives and final approval of the
Board.
(c) Benefits . During the
Employment Term (and thereafter to the extent expressly provided
herein), the Executive shall be entitled to participate in all of
the Company’s employee benefit plans applicable to the
Company’s comparable senior executives according to the terms
of those plans.
4. Termination of
Employment .
(a) By the Company For Cause
. The Company may terminate the Executive’s employment under
this Agreement at any time for Cause (as defined in
Section 4(e)) and shall provide written notice of termination
to the Executive (which notice shall specify in reasonable detail
the basis upon which such termination is made). In the event the
Executive’s employment is terminated for Cause, all
provisions of this Agreement (other than Sections 5 through 14
hereof) and the Employment Term shall be terminated. Upon
termination for Cause, the Executive shall be entitled to payment
of the Executive’s earned and unpaid Base Salary to the date
of termination.
(b) Upon Death or Disability
. If the Executive dies, all provisions of Section 3 of this
Agreement (other than rights or benefits arising as a result of
such death) and the Employment Term shall be automatically
terminated; provided, however, that an amount equal to the
earned and unpaid Incentive Payments to the date of death and
earned and unpaid Base Salary to the date of death shall be paid to
the Executive’s surviving spouse or, if none, the
Executive’s estate, and the death benefits under the
Company’s employee benefit plans shall be paid to the
Executive’s beneficiary or beneficiaries as properly
designated in writing by the Executive. If the Executive is unable
to perform the essential functions of the Executive’s job
under this Agreement, with or without reasonable accommodation, by
reason of physical or mental disability or incapacity (“
Disability ”) and such disability or incapacity shall
have continued for any period of one hundred eighty
(180) days, the Company may terminate this Agreement and the
Employment Term at any time thereafter. In such event, the
Executive shall be entitled to receive the Executive’s normal
compensation hereunder during said time of disability or
incapacity, and shall thereafter be entitled to receive the
“Disability Incentive Payment” (as described in the
last sentence of this subsection (b)) and accrued and unpaid
Base
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Salary to the date of termination.
The portion of the payment representing the Disability Incentive
Payment shall be paid in a lump sum determined on a net present
value basis, using a reasonable discount rate determined by the
Board. The Disability Incentive Payment shall be equal to the
target Incentive Payment that the Executive would have been
eligible to receive for the year in which the Employment Term is
terminated multiplied by a fraction, the numerator of which is the
number of days in such year before and including the day of
termination of the Employment Term and the denominator of which is
the total number of days in such year.
(c) By the Company Without
Cause .
(i) The Company may terminate the
Executive’s employment under this Agreement at any time
without Cause (for purposes of clarity, it is acknowledged that
expiration of the Employment Term (including notice of non-renewal)
shall not be considered a termination without Cause), and other
than by reason of the Executive’s death or disability. The
Company shall provide written notice of termination to the
Executive, which notice shall specify the effective date of such
termination and that the termination is without Cause (the “
Termination Date ”). If the Termination Date is later
than the date of the notice, then from the date of the notice
through the Termination Date, the Executive shall continue to
perform the normal duties of the Executive’s employment
hereunder, and shall be entitled to receive when due all
compensation and benefits applicable to the Executive hereunder.
Thereafter, conditioned upon the Executive executing and not
revoking a general release in favor of the Company, the Board and
their affiliates, in a form acceptable to the Company, the Company
shall pay the Executive the amounts set forth in this subsection
(c). Under such circumstances, the Company shall pay the Executive
an amount equal to fifty percent (50%) of the
Executive’s Base Salary for a period of twenty-four
(24) months (the “ Termination Period ”),
in such periodic installments as were being paid immediately prior
to the Termination Date.
(ii) The Company shall pay the
Executive, on the date the Executive would otherwise be paid the
Incentive Payment, an amount equal to the full target Incentive
Payment for the year that includes the Termination Date multiplied
by a fraction, the numerator of which is the number of complete
months in the Termination Period and the denominator of which is
12.
(iii) The Company shall also be
obligated to pay to the Executive earned and unpaid Base Salary to
the Termination Date.
(iv) During the Termination Period,
the Executive and the Executive’s dependents will be entitled
to continued participation in the “employee welfare benefit
plans” (as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974) in which the Executive and
the Executive’s dependents participated on the
Executive’s Termination Date with respect to any such plans
for which such continued participation is allowed pursuant to
applicable law and the terms of the plan. Notwithstanding the
foregoing, the coverage or reimbursements for coverage provided
under this subsection (iv) shall cease if the
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Executive and/or the
Executive’s dependents become covered under an employee
welfare benefit plan of another employer of the Executive that
provides the same or similar type of benefits.
(d) By the Executive . The
Executive may terminate the Executive’s employment, and any
further obligations which the Executive may have to perform
services on behalf of the Company hereunder at any time after the
date hereof; by sending written notice of termination to the
Company not less than thirty (30) days prior to the effective
date of such termination. During such thirty (30) day period,
at the election of the Company, the Executive shall continue to
perform the normal duties of the Executive’s employment
hereunder, and shall be entitled to receive when due all
compensation and benefits applicable to the Executive hereunder.
Except as provided below, if the Executive shall elect to terminate
the Executive’s employment hereunder (other than as a result
of the Executive’s death or disability), then the Executive
shall be entitled to receive accrued and unpaid Base Salary to the
date of termination, but the Company shall have no further
obligation to make payments or provide benefits to the Executive
under Section 3 hereof. Anything in this Agreement to the
contrary notwithstanding, the termination of the Executive’s
employment by the Executive for Good Reason (as defined in
Section 4(e)), shall be deemed to be a termination of the
Executive’s employment without Cause by the Company for
purposes of this Agreement, and the Executive shall be entitled to
the payments and benefits set forth in Section 4(c) above,
subject to the Executive executing and not revoking a general
release in favor of the Company, the Board and their affiliates, in
a form acceptable to the Company. Notwithstanding the foregoing, in
no event shall any termination of employment by the Executive be
deemed for Good Reason unless the Executi
