EMPLOYMENT
AGREEMENT dated as of April 19, 2007, between AMERICAN COLOR
GRAPHICS, INC., a New York corporation (the “ Company
”), and PATRICK W. KELLICK (the “ Executive
”).
WHEREAS, the
Executive is currently employed by the Company and is a party to a
letter agreement dated October 3, 1996, as amended (the
“ 1996 Agreement ”); and
WHEREAS, the
Company desires to continue the Executive’s employment and to
provide the Executive with additional incentives to remain in the
employ of the Company on the terms and conditions set forth herein,
and the Executive desires to continue such employment on the terms
and conditions set forth herein;
NOW, THEREFORE, in
consideration of the covenants and agreements hereinafter set forth
and for other good and valuable consideration, the parties hereto
agree to amend and restate the 1996 Agreement in its entirety as
follows:
1.
EFFECTIVENESS OF AGREEMENT
This Agreement
shall become effective, and shall supersede the 1996 Agreement, as
of the date set forth above (the “ Effective Time
”).
2.1.
General . The Company hereby employs the Executive, and the
Executive agrees to serve, as Senior Vice President, Chief
Financial Officer and Secretary of the Company, upon the terms and
conditions contained herein. The Executive shall have all the
responsibilities and powers normally associated with such offices.
The Executive shall perform such other duties and services for the
Company, commensurate with the Executive’s position, as may
be designated from time to time by the Board. The Executive agrees
to serve the Company faithfully and to the best of his ability
under the direction of the Board.
2.2.
Exclusive Services . Except as may otherwise be approved in
advance by the Board, and except during vacation periods and
reasonable periods of absence due to sickness, personal injury or
other disability, the Executive shall devote his full working time
throughout the Employment Term to the services required of him
hereunder. The Executive shall render his services exclusively to
the Company during the Employment Term, and shall use his best
efforts, judgment and energy to improve and advance the business
and interests of the Company in a manner consistent with the duties
of his position. However, nothing in this Agreement shall preclude
Executive from (a) serving on the boards of a reasonable number of
business entities, trade associations and charitable organizations,
(b) engaging in charitable activities and community affairs,
(c) accepting and fulfilling a reasonable number of speaking
engagements, and (d) managing his personal investments and
affairs; provided that such activities do not either
individually or in the aggregate: interfere with the proper
performance of his duties and responsibilities hereunder; create a
conflict of interest; or violate any provision of this
Agreement; and
provided further that service on the board of any
business entity must be approved in advance by the
Board.
2.3.
Term of Employment . The Executive’s employment under
this Agreement shall commence as of the Effective Time and shall
terminate on the earlier of (a) the second anniversary of the
Effective Time, or (b) termination of the Executive’s
employment pursuant to this Agreement; provided ,
however , that on each anniversary of the date hereof the
term of the Executive’s employment shall be automatically
extended without further action of either party for an additional
one-year period, unless written notice of either party’s
intention not to extend has been given to the other party hereto at
least one year prior to the expiration of the then effective term.
The period commencing and ending on the second anniversary of the
Effective Time, or such later date to which the term of the
Executive’s employment under this Agreement shall have been
extended, is hereinafter referred to as the “ Employment
Term ”.
2.4.
Reimbursement of Expenses . The Company shall reimburse the
Executive for reasonable travel and other business expenses
incurred by him in the fulfillment of his duties hereunder upon
presentation by the Executive of an itemized account of such
expenditures, in accordance with Company practices consistently
applied.
3.
SALARY; OTHER COMPENSATION
3.1.
Base Salary . From the Effective Time, the Executive shall
be entitled to receive (a) a base salary at a rate of
$325,000.00 per annum, payable in arrears in equal installments not
less frequently than biweekly in accordance with the
Company’s payroll practices, with such increases as may be
provided in accordance with the terms hereof, and (b) a
monthly car allowance of $1,100.00 (collectively, the “
Base Salary ”). Once increased, such higher amount
shall constitute the Executive’s annual Base
Salary.
3.2.
Annual Review . The Executive’s Base Salary shall be
reviewed by the Board, based upon the Executive’s
performance, not less often than annually, and may be increased but
not decreased. In addition to any increases effected as a result of
such review, the Board at any time may in its sole discretion
increase the Executive’s Base Salary.
3.3.
Bonus . The Board shall annually adopt a bonus plan and
performance criteria upon which the bonuses of executives of the
Company shall be based. During his employment under this Agreement,
the Executive shall be entitled to participate in such bonus plan,
under which the Executive shall be entitled to receive a bonus of
at least 50% of his Base Salary if the budget performance criteria
are satisfied.
3.4.
Special Retention Bonus . In consideration of the Executive
entering into this Agreement, concurrent with the execution and
delivery of this Agreement, the Company is paying the Executive a
special retention bonus of $225,000.00 in cash. If the Executive
resigns without Good Reason, or the Company terminates the
Executive’s employment for Cause, prior to April 1,
2008, the Executive agrees to repay such special retention bonus to
the Company within five business days of the date of his
resignation or termination, together with interest from the date
the Executive received the bonus (calculated at the prime rate as
published in the Wall Street Journal on the date the Executive
received the bonus) to the date of repayment. The
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Company
acknowledges that the special retention bonus is in addition to,
and not in lieu of, any regular incentive bonus plan in which the
Executive may participate during the 2008 fiscal year.
The Executive
shall, during his employment under this Agreement, be included to
the extent eligible thereunder in all employee benefit plans,
programs or arrangements (including, without limitation, any plans,
programs or arrangements providing for retirement benefits,
incentive compensation, profit sharing, bonuses, disability
benefits, health and life insurance, or paid holidays) which shall
be established by the Company for, or made available to, its senior
executives. The Executive shall be entitled to four weeks per year
of vacation with full pay in accordance with the vacation policy of
the Company.
5.
TERMINATION OF EMPLOYMENT
5.1.
Termination Without Cause; Resignation for Good Reason
.
5.1.1.
General . Subject to the provisions of Sections 5.3 and
5.4, if, prior to the expiration of the Employment Term, the
Executive’s employment is terminated by the Company without
Cause, or if the Executive resigns for Good Reason, the Company
shall pay to the Executive in cash (a) a payment equal to two
times the sum of (i) the Executive’s annual Base Salary
and (ii) the greater of (A) the annual bonus earned by
the Executive for the last completed fiscal year prior to the
fiscal year in which the date of termination or resignation occurs
and (B) the annual bonus the Executive would have earned for
the full fiscal year in which the date of termination or
resignation occurs absent such termination or resignation (which
amount shall be based upon the Company’s (and if applicable
the Executive’s) actual performance against target (expressed
as a percentage of achievement of targeted performance) applicable
to the portion of the performance period during which the Executive
was employed, with such percentage level of achievement annualized
for the full fiscal year), and (b) any unpaid amounts of the
Executive’s Base Salary for periods prior to the date of
termination or resignation and earned annual bonuses for completed
fiscal years prior to the date of termination or resignation. The
payments described in clause (a)(i) of the next preceding sentence
(less any amounts of Base Salary theretofore received for any
period after the effective date of such termination or resignation)
shall be made (1) ratably over the remainder of the Severance
Period in accordance with the Company’s normal payroll
practices or (2) (if Stephen M. Dyott shall have ceased (for any
reason) to be the chief executive officer of the Company at any
time prior to, or prior to the end of the one hundred eightieth day
after, the date of such termination or resignation), in a lump sum
within 10 business days after the date of termination or
resignation of the Executive (or Mr. Dyott, if later), and the
payments described in clauses (a)(ii) and (b) of the next
preceding sentence shall be made in a lump sum within 10 business
days after the date of termination or resignation. In addition, the
Executive shall be entitled to continue to participate during the
Severance Period in all employee health and welfare benefit plans
that the Company or any parent thereof provides (and continues to
provide) generally to its employees on the same terms as are
provided to active executives of the Company or any such parent.
The Executive shall have no further right to receive any other
compensation or benefits after such termination or resignation
except as determined in accordance with the terms of the employee
benefit plans or programs of the Company or such parent.
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5.1.2.
Date of Termination or Resignation . The date of termination
of employment without Cause shall be the date specified in a
written notice of termination to the Executive. Subject to the
proviso to Section 5.6, the date of resignation for Good
Reason shall be the date specified in the written notice of
resignation from the Executive to the Company; provided ,
however , that no such written notice shall be effective
unless the cure period specified in Section 5.6 has expired
without the Company having corrected, to the reasonable
satisfaction of the Executive, the event or events subject to cure.
If no date of resignation is specified in the written notice from
the Executive to the Company, the date of resignation shall be the
first day following such expiration of such cure period.
5.1.3.
Release . If the Executive’s employment is terminated
by the Company without Cause or if the Executive resigns for Good
Reason, the Company shall release the Executive from liability for
any and all acts or omissions of the Executive except for the
Executive’s gross negligence or willful
misconduct.
5.2.
Termination for Cause; Resignation Without Good Reason
.
5.2.1.
General . If, prior to the expiration of the Employment
Term, the Executive’s employment is terminated by the Company
for Cause, or the Executive resigns other than for Good Reason, the
Executive shall be entitled only to payment of his Base Salary as
then in effect through and including the date of termination or
resignation. The Executive shall have no further right to receive
any other compensation or benefits after such termination or
resignation, except as determined in accordance with the terms of
the employee benefit plans or programs of the Company.
5.2.2.
Date of Termination or Resignation . Subject to the further
proviso to Section 5.5, the date of termination for Cause shall be
the date specified in a written notice of termination to the
Executive. The date of resignation without Good Reason shall be the
date specified in the written notice of resignation from the
Executive to the Company, or if no date is specified therein, ten
business days after receipt by the Company of written notice of
resignation from the Executive.
5.3.
Conditions Applicable to the Severance Period . If, during
the Severance Period, the Executive materially breaches his
obligations under Section 8, the Company may, upon written
notice to the Executive, terminate the Severance Period and cease
to make any further payments or provide any benefits described in
Section 5.1. Anything herein to the contrary notwithstanding,
the Company’s obligation to make any payment or provide any
benefits described in Section 5.1 shall be subject to the
Executive’s execution of the Company’s standard form
release of claims.
5.4.
Death During Severance Period . In the event of the
Executive’s death during the Severance Period, payments of
Base Salary under this Section 5 shall continue to be made
during the remainder of the Severance Period to the beneficiary
designated in writing for this purpose by the Executive or, if no
such beneficiary is specifically designated, to the
Executive’s estate.
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5.5.
Cause . Termination for “ Cause ” shall
mean termination of the Executive’s employment because of
(a) any act or omission that constitutes a material breach by
the Executive of any of his obligations under this Agreement;
(b) the continued willful failure or refusal of the Executive
to substantially perform the duties reasonably required of him as
an employee of the Company; (c) any willful and material
violation by the Executive of any Federal or state law or
regulation applicable to the business of the Company, Parent or any
of their respective subsidiaries, or the Executive’s
conviction of a felony, or any willful perpetration by the
Executive of a common law fraud that is materially injurious to the
Company; or (d) any other willful misconduct by the Executive
which is materially injurious to the financial condition or
business reputation of, or is otherwise materially injurious to,
the Company, the Parent or any of their respective subsidiaries or
affiliates; provided , however , that (x) the
good faith performance by the Executive of the duties required of
him pursuant to this Agreement, (y) any act or omission of the
Executive based upon authority given by or pursuant to an action of
the Board or upon the advice of counsel for the Company or
(z) any disagreement with respect to the advisability, timing
or implementation of the sale of any capital stock or assets of the
Company or Parent, shall be conclusively presumed not to be willful
or to constitute a failure or refusal on the part of the Executive
(it being understood that clause (z) above is not intended to
be exclusive with respect to the extent to which disagreements in
policy will be presumed not to be willful or to constitute a
failure or refusal on the part of the Executive); provided
further , however , that if any such Cause relates to
the Executive’s obligations under this Agreement, the Company
shall not terminate the Executive’s employment hereunder
unless the Company first gives the Executive written notice of its
intention to terminate and of the grounds for such termination, and
the Executive has not, within 20 business days following receipt of
the notice, cured such Cause, to the reasonable satisfaction of the
Board, or in the event such Cause is not susceptible to cure within
such 20-business day period, the Executive has not taken all
reasonable steps within such 20-business day period to cure such
Cause, to the reasonable satisfaction of the Board, as promptly as
practicable thereafter. For purposes of this Section 5.5, no act,
or failure to act, on the Executive’s part shall be deemed
“willful” unless committed, or omitted, by the
Executive in bad faith.
5.6.
Good Reason . For purposes of this Agreement, “
Good Reason ” shall mean any of the following (without
the Executive’s prior written consent) (a) a decrease in
the Executive’s base rate of compensation or a failure by the
Company to pay material compensation due and payable to the
Executive in connection with his employment; (b) a material
diminution of the responsibilities or title of the Executive with
the Company or Parent; (c) the Company’s requiring the
Executive to be based at any office or location more than 20 miles
from his principal employment location on the date of this
Agreement, except for any change in employment location agreed to
with the Executive prior to the Effective Time; (d) a material
breach by the Company of any term or provision of this Agreement
(including, without limitation, any such breach by operation of
law); (e) receipt by the Executive of written notice from the
Company of its intention not to extend the term of the
Executive’s employment pursuant to Section 2.3;
(f) the failure by the Company to obtain from any successor
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all the business or assets of
the Company an express written assumption and agreement to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place; or (g) a Change of Control of the Company shall
have occurred; provided , however , that no event or
condition described (i) in clauses (a)
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through
(f) of this Section 5.6 shall constitute Good Reason
unless (A) the Executive gives the Company written notice of
his objection to such event or condition, (B) such event or
condition is not corrected by the Company within 20 business days
of its receipt of such notice (or in the event that such event or
condition is not susceptible to correction within such 20-business
day period, the Company has not taken all reasonable steps within
such 20-business day period to correct such event or condition as
promptly as practicable thereafter), and (C) the Executive
resigns his employment with the Company and its subsidiaries not
more than 40 business days following the expiration of the
20-business day period described in the foregoing clause (B), or
(ii) in clause (g) of this Section 5.6 shall
constitute Good Reason unless the Executive resigns within 40
business days after the closing of such Change of Control or within
10 business days after the first anniversary of such Change of
Control.
6. DEATH,
DISABILITY OR RETIREMENT
Subject to
Section 5.4, in the event of termination of employment by
reason of death, Permanent Disability or retirement, the Executive
(or his estate, as applicable) shall be entitled to Base Salary and
benefits determined under Sections 3 and 4 through the date of
termination. Other benefits shall be determined in accordance with
the benefit plans maintained by the Company, and the Company shall
have no further obligation hereunder. For purposes of this
Agreement, “ Permanent Disability ” means a
physical or mental disability or infirmity of the Executive that
prevents the normal performance of substantially all his duties as
an employee of the Company for a period of more than six months, or
six months in the aggregate during any 12-month period, established
by medical evidence reasonably satisfactory to the
Company.
7. NO
MITIGATION OR OFFSET
The Executive
shall not be required to mitigate the amount of any payment or
benefit provided for herein by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation or benefits earned by the
Executive after the date of the Executive’s termination of
employment or resignation.
8.
NON-SOLICITATION; CONFIDENTIALITY:
NON-COMPETITION
8.1.
Non-solicitation . For so long as the Executive is employed
by the Company and continuing for two years thereafter, the
Executive shall not, without the prior written consent of the
Company, directly or indirectly, as a sole proprietor, member of a
partnership, stockholder or investor, officer or director of a
corporation, or as an employee, associate, consultant or agent of
any person, partnership, corporation or other business organization
or entity other than the Company: (a) solicit or endeavor to
entice away from the Company, the Parent or any of their respective
subsidiaries any person or entity who is, or, during the then most
recent 12-month period, was employed by, or had served as an agent
or key consultant of, the Company, the Parent or any of their
respective subsidiaries; or (b) solicit or endeavor to entice
away from the Company, the Parent or any of their respective
subsidiaries any person or entity who is, or was within the then
most recent 12-month period, a customer or client (or reasonably
anticipated (to the general knowledge of the Executive or the
public) to become a customer or client) of the Company, the Parent
or any of their respective subsidiaries.
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8.2.
Confidentiality . The Executive covenants and agrees with
the Company that he will not at any time, except in performance of
his obligations to the Company hereunder or with the prior written
consent of the Company, directly or indirectly, disclose any secret
or confidential information that he may learn or has learned by
reason of his association with the Company, the Parent or any of
their respective subsidiaries and affiliates. The term “
confidential information ” includes information not
previously disclosed to the public or to the trade by the
Company’s management, or otherwise in the public domain, with
respect to the Company’s, the Parent’s or any of their
respective affiliates’ or subsidiaries’ products,
facilities, applications and methods, trade secrets and other
intellectual property, systems, procedures, manuals, confidential
reports, product price lists, customer lists, technical
information, financial information (including the revenues, costs
or profits associated with any of the Company’s products),
business plans, prospects or opportunities, but shall exclude any
information which (a) is or becomes available to the public or is
generally known in the industry or industries in which the Company
operates other than as a result of disclosure by the Executive in
violation of his agreements under this Section 8.2 or
(b) the Executive is required to disclose under any applicable
laws, regulations or directives of any government agency, tribunal
or authority having jurisdiction in the matter or under subpoena or
other process of law.
8.3.
No Competing Employment . For so long as the Executive is
employed by the Company and continuing for two years thereafter,
the Executive shall not, directly or indirectly, as a sole
proprietor, member of a partnership, stockholder or investor (other
than a stockholder or investor owning not more than a 5% interest),
officer or director of a corporation, or as an employee, associate,
consultant or agent of any person, partnership, corporation or
other business organization or entity other than the Company,
Parent, or any of their respective Affiliates, render any service
to or in any way be affiliated with a Competitor (or any person or
entity that is reasonably anticipated (to the general knowledge of
the Executive or the public) to become a Competitor) of the
Company, the Parent or any of their respective subsidiaries;
provided , however , that if (a) the Company
exercises its right not to extend the Employment Term pursuant to
Section 2.3 and the Executive’s employment is terminated
for any reason following the expiration of the Employment Term, or
(b) the Executive’s employment by the Company is
terminated or the Executive resigns and, in either case,
(i) the Executive is not entitled to the payments described in
Section 5.1.1(a), or, if entitled thereto, does not receive
such payments in full, or is entitled to less than the full amount
described therein, and (ii) Mr. Dyott shall have ceased
(for any reason) to be the chief executive officer of the Company
at any time prior to, or prior to the end of the one hundred
eightieth day after, the date of such termination or registration,
the Executive’s obligations under this Section 8.3 shall
terminate as of the date of termination of employment or
resignation.
8.4.
Exclusive Property . The Executive confirms that all
confidential information is and shall remain the exclusive property
of the Company. All business records, papers and documents kept or
made by the Executive relating to the business of the Company shall
be and remain the property of the Company, except for such papers
customarily deemed to be the personal copies of the
Executive.
8.5.
Injunctive Relief . Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach
of any of the covenants contained in this Section 8 may result in
material and irreparable injury to the
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