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EXHIBIT 10.2
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May 29, 2007, among Clarke
American
Corp., a Delaware corporation ("CLARKE AMERICAN"), renamed as
Harland Clarke
Holdings Corp. ("HARLAND CLARKE HOLDINGS"), Harland Financial
Solutions, Inc.,
an Oregon corporation ("HFS" or the "COMPANY"), and John
O'Malley (the
"EXECUTIVE").
WHEREAS, on December 19, 2006, Harland, M&F Worldwide Corp.
("MFW") and
H Acquisition Corp., a Georgia corporation and a wholly owned
subsidiary of MFW,
entered into an Agreement and Plan of Merger whereby H
Acquisition Corp. merged
with and into John H. Harland Company, a Georgia corporation
("HARLAND"), and as
a result, the separate corporate existence of H Acquisition
Corp. ceased and
Harland continued as the surviving corporation effective May 1,
2007 (the
"TRANSACTION");
WHEREAS, the Company wishes to employ the Executive, and the
Executive
wishes to accept such employment on the terms and conditions set
forth in this
Agreement.
Accordingly, Harland Clarke Holdings, the Company and the
Executive
hereby agree as follows:
1. EMPLOYMENT, DUTIES AND ACCEPTANCE.
1.1 EMPLOYMENT, DUTIES. The Company hereby employs the
Executive for the Term (as defined in Section 2.1), to render
exclusive and
full-time services to the Company as President and Chief
Executive Officer of
HFS or in such other executive position as may be mutually
agreed upon by the
Company and the Executive, and to perform such other duties
consistent with such
position as may be assigned to the Executive by the Board of
Directors of
Harland Clarke Holdings (the "BOARD"). During the Term, the
Executive shall
report solely to the Board and to the Chief Executive Officer of
MFW.
1.2 ACCEPTANCE. The Executive hereby accepts such employment
and agrees to render the services described above. During the
Term, the
Executive agrees to serve the Company faithfully and to the best
of the
Executive's ability, to devote the Executive's entire business
time, energy and
skill to such employment, and to use the Executive's best
efforts, skill and
ability to promote the Company's interests. The Executive
further agrees to
accept election, and to serve during all or any part of the
Term, as an officer
or director of the Company and of any subsidiary or affiliate of
the Company,
without any compensation therefor other than that specified in
this Agreement,
if elected to any such position by the shareholders or by the
Board or of any
subsidiary or affiliate, as the case may be.
1.3 LOCATION. The duties to be performed by the Executive
hereunder shall be performed primarily at the offices of the
Company in Lake
Mary, Florida, subject to reasonable travel requirements on
behalf of the
Company.
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2. TERM OF EMPLOYMENT; CERTAIN POST-TERM BENEFITS.
2.1 THE TERM. This Agreement and the term of the Executive's
employment under this Agreement (the "TERM") shall become
effective as of May 2,
2007 (the "EFFECTIVE DATE") and will continue until December 31,
2010 (the
"TERMINATION DATE"), subject to earlier termination pursuant to
Section 4.
2.2 END-OF-TERM PROVISIONS. Prior to the end of the Term,
the Company and the Executive shall meet to discuss whether the
Term should be
extended. The Company shall have the right at any time, however,
to give written
notice of non-renewal of the Term. In the event of non-renewal
of the Term by
the Company and the Executive's employment is terminated after
the end of the
Term, other than for Cause (as defined below), or Disability (as
defined below)
following such notice of non-renewal, then such termination
shall be treated as
a termination without Cause and the Restricted Period (as
defined below) shall
be reduced to a period of one year post termination of
employment (the "REDUCED
RESTRICTED Period"). During such Restricted Period, the
Executive shall receive
50% of the payments set forth in Sections 4.4(i) and 4.4(ii),
subject to
Executive's signing and not revoking the release of claims as
set forth in
Section 4.6. For the avoidance of doubt, if the Company is
willing to extend the
Term and Executive does not agree to extend the Term, then upon
such termination
of employment at the end of the Term, the Executive shall be
bound by the
restrictive covenants set forth in Section 5 below, the
Restricted Period shall
not be reduced and Executive shall not be entitled to receive
any severance
benefits with respect to such termination.
3. COMPENSATION; BENEFITS.
3.1 SALARY. As compensation for all services to be rendered
pursuant to this Agreement, the Company agrees to pay the
Executive a base
salary, payable in accordance with the Company's normal payroll
practices, at
the annual rate of not less than $750,000 less such deductions
or amounts to be
withheld as required by applicable law and regulations (the
"BASE SALARY"). In
the event that the Company, in its sole discretion, from time to
time determines
to increase the Base Salary, such increased amount shall, from
and after the
effective date of the increase, constitute "Base Salary" for
purposes of this
Agreement.
3.2 INCENTIVE COMPENSATION.
3.2.1 ANNUAL BONUS. For fiscal year 2007, the
Executive's bonus, if any (the "2007 BONUS"), shall be
determined in the
following manner: (a) with respect to the period from January 1,
2007
through April 30, 2007, the Executive shall receive an amount in
bonus
compensation equal to what the Executive was entitled to receive
under
the Harland Senior Management Incentive Plan for such period had
such
plan terminated at April 30, 2007, and (b) Harland Clarke
Holdings shall
establish for the Company a bonus plan applicable to the
remaining
portion of fiscal year 2007 from and after May 1, 2007, as
approved by
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the Compensation Committee of MFW's board of directors (the
"MFW
COMPENSATION COMMITTEE") which may be, but need not be, designed
to
cause the 2007 Bonus to qualify as "performance-based
compensation," as
more fully set forth in the last sentence of the second
paragraph of
this Section 3.2.1, and such bonus plan shall be calculated
consistent
with the percentages set forth in the table below. Any such
bonus
amounts payable with respect to 2007 pursuant to clauses (a) and
(b)
shall be paid consistent with past practice in fiscal year
2008.
Commencing with the 2008 fiscal year, the Executive will be
eligible to
receive a bonus with respect to 2008 and each later fiscal year
ending
during the Term computed in accordance with the provisions
hereafter.
If, with respect to any such fiscal year, HFS achieves
"Consolidated
EBITDA" (as defined below) of at least the percentage set forth
in the
table below of its business plan for such fiscal year, such
bonus shall
be the percentage set forth in the table below of Base Salary
with
respect to the fiscal year for which the bonus (any such bonus,
an
"ANNUAL BONUS") was earned:
PERCENTAGE OF CONSOLIDATED
EBITDA IN BUSINESS PLAN PERCENTAGE OF BASE SALARY
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89.9% and below Nil
90 - 94.9 95
95 - 99.9 97.5
100 - 105 100
105.1 - 110 102.5
110.1 - 115 105
115.1 - 120 107.5
120.1 - 125 110
125.1 - 130 112.5
130.1 - 135 115
135.1 - 140 117.5
140.1 - 145 120
145.1 - 150 122.5
150.1 and over 125
An Annual Bonus if earned in accordance with this Agreement
shall be paid no
later than the fifteenth day of the third month next following
the year with
respect to which such bonus was earned, provided that, except as
otherwise
specifically provided in this Agreement (including, without
limitation, Section
4.4), as a condition precedent to any bonus entitlement the
Executive must
remain in employment with the Company at the time that the
Annual Bonus is paid.
Notwithstanding the foregoing, to the extent that Section 162(m)
of the Internal
Revenue Code of 1986, as amended (the "CODE"), may be
applicable, such Annual
Bonus shall be subject to, and contingent upon, such shareholder
approval as is
necessary to cause the Annual Bonus to qualify as
"performance-based
compensation" under Section 162(m) of the Code and the
regulations promulgated
thereunder as well as approval of this Section 3.2.1 by the MFW
Compensation
Committee and any other required committees.
For the purposes of this Agreement, "CONSOLIDATED EBITDA" means
for any fiscal
year of the Company, consolidated operating income for such
fiscal year of HFS
plus, without duplication, the sum of (i) depreciation and
amortization expense
(excluding amounts of prepaid incentives under customer
contracts), (ii) any
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extraordinary non-cash expenses or losses, and (iii) allocation
of fees charged
by MFW or a subsidiary to the Company relating to the operation
of HFS, and
minus (x) to the extent included in the statement of such
consolidated net
income for such period, the sum of any extraordinary or
non-recurring income or
gains (including, whether or not otherwise includable as a
separate item in the
statement of such consolidated operating income for such period,
gains on the
sales of assets outside of the ordinary course of business), and
(y) any cash
payments made during such period in respect of items described
in clause (ii)
above subsequent to the fiscal quarter in which the relevant
non-cash expenses
or losses were reflected as a charge in the statement of
consolidated operating
income, all as determined on a consolidated basis, all of the
foregoing to be
determined by the Board or the MFW Compensation Committee, as
applicable. For
the purposes of determining compensation milestones for any
fiscal year,
Consolidated EBITDA will be adjusted by the Board or the MFW
Compensation
Committee, as applicable, as appropriate for material
acquisitions or
dispositions of any business or assets of or by HFS or its
subsidiaries for such
fiscal year and thereafter.
3.2.2 LONG TERM INCENTIVE PLAN. During the Term, the
Executive shall participate in the Long Term Incentive Plan
("LTIP") of
MFW which shall be established and become effective as of
January 1,
2008. The Executive will receive 50% of the "LTIP bonus pool
attributed
to HFS," as defined in, and in accordance with, the LTIP.
Further
details regarding participation in the LTIP are set forth on
ANNEX A
attached hereto. If the Term is extended, the Executive
shall
participate in a new Long Term Incentive Plan that shall
commence after
the LTIP ends. Notwithstanding the foregoing, to the extent that
Section
162(m) of the Code may be applicable, the LTIP (and any
subsequent Long
Term Incentive Plan) shall be subject to, and contingent upon,
such
shareholder approval as is necessary to cause the LTIP to
qualify as
"performance-based compensation" under Section 162(m) of the
Code and
the regulations promulgated thereunder.
3.2.3 SPECIAL BONUS. The Company shall pay the
Executive a one-time cash payment of $300,000 as a special bonus
(the
"SPECIAL BONUS") which shall be paid to the Executive within 45
days
following the Effective Date.
3.3 BUSINESS EXPENSES. The Company shall pay or reimburse
the Executive for all reasonable expenses actually incurred or
paid by the
Executive during the Term in the performance of the Executive's
services under
this Agreement, upon presentation of expense statements or
vouchers or such
other supporting information as the Company customarily may
require of its
officers PROVIDED, HOWEVER, that the maximum amount available
for such expenses
during any period may be fixed in advance by the Board.
3.4 VACATION. During the Term, the Executive shall be
entitled to a vacation period or periods of four (4) weeks
during any fiscal
year taken in accordance with the vacation policy of the Company
during each
year of the Term. Vacation time not used by the end of a year
shall be
forfeited.
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3.5 FRINGE BENEFITS. During the Term, the Executive shall be
entitled to all benefits for which the Executive shall be
eligible under any
qualified pension plan, 401(k) plan, group insurance or other
so-called "fringe"
benefit plan which the Company provides to its executive
employees generally,
which benefits may be subject to change to reflect the
objectives and
requirements of the Transaction.
4. TERMINATION.
4.1 DEATH. If the Executive dies during the Term, the Term
shall terminate forthwith upon the Executive's death. The
Company shall pay to
the Executive's estate: (i) any Base Salary earned but not paid;
(ii) a pro
rated Annual Bonus based on the number of days of the fiscal
year worked by the
Executive; and (iii) amounts payable under the LTIP in
accordance with the terms
thereof. The Executive shall have no further rights to any
compensation
(including any Base Salary or Annual Bonus) or any other
benefits under this
Agreement, except to the extent already earned and vested as of
the day
immediately prior to his death, or as earned, vested, or accrued
by virtue of
his death.
4.2 DISABILITY. If, during the Term the Executive is unable
to perform his duties hereunder due to a physical or mental
incapacity for a
period of 6 months within any 12 month period (hereinafter a
"DISABILITY"), the
Company shall have the right at any time thereafter to terminate
the Term upon
sending written notice of termination to the Executive. If the
Company elects to
terminate the Term by reason of Disability, the Company shall
pay to the
Executive promptly after the notice of termination: (i) any Base
Salary earned
but not paid, (ii) a pro rated Annual Bonus based on the number
of days of the
fiscal year worked by the Executive until the date of the notice
of termination,
and (iii) amounts payable under the LTIP in accordance with the
terms thereof,
in each case less any other benefits payable to the Executive
under any
disability plan provided for hereunder or otherwise furnished to
the Executive
by the Company. The Executive shall have no further rights to
any compensation
(including any Base Salary or Annual Bonus) or any other
benefits under this
Agreement except to the extent already earned and vested as of
the day
immediately prior to his termination by reason of Disability, or
as earned,
vested, or accrued by virtue of his Disability.
4.3 CAUSE. The Company may at any time by written notice to
the Executive terminate the Term for "Cause" (as defined below)
and, upon such
termination, this Agreement shall terminate and the Executive
shall be entitled
to receive no further amounts or benefits hereunder, except for
any Base Salary
earned but not paid prior to such termination. For the purposes
of this
Agreement, "CAUSE" means: (i) continued neglect by the Executive
of the
Executive's duties hereunder, (ii) continued incompetence or
unsatisfactory
attendance, (iii) conviction of any felony, (iv) violation of
the rules,
regulations, procedures or instructions relating to the conduct
of employees,
directors, officers and/or consultants of the Company, (v)
willful misconduct by
the Executive in connection with the performance of any material
portion of the
Executive's duties hereunder, (vi) breach of fiduciary
obligation owed to the
Company or commission of any act of fraud, embezzlement,
disloyalty or
defalcation, or usurpation of a Company opportunity, (vii)
breach of any
provision of this Agreement, including any non-competition,
non-solicitation
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and/or confidentiality provisions hereof, (viii) any act that
has a material
adverse effect upon the reputation of and/or the public
confidence in the
Company, (ix) failure to comply with a reasonable order, policy
or rule that
constitutes material insubordination, (x) engaging in any
discriminatory or
sexually harassing behavior or (xi) using, possessing or being
impaired by or
under the influence of illegal drugs or the abuse of controlled
substances or
alcohol on the premises of the Company or any of its
subsidiaries or affiliates
or while working or representing the Company or any of its
subsidiaries or
affiliates. A termination for Cause
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