EMPLOYMENT AGREEMENT
---------------------
EMPLOYMENT AGREEMENT, dated as of January 23, 2006, between
Clarke American Corp., a Delaware corporation ("CAC" or the
"Company"), and
Daniel Singleton (the "Executive").
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, 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 Senior Vice President, Partnership
Development
(Sales) 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 Chief
Executive Officer
of the Company.
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
of Directors
(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 San
Antonio,
Texas, subject to reasonable travel requirements on behalf of the
Company.
2. Terms 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 the
date hereof
(the "Effective Date") and will continue for a period of two years
(the final
date of the two year period being referred to herein as 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.
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The Company shall have the right at any time, however, to give
written
notice of nonrenewal of the Term.
2.3 Non-renewal of Term. The Term shall end earlier than the
Termination Date provided in Section 2.1 or any extended
termination date
provided in Section 2.2, in either case if sooner terminated
pursuant to
Section 4. Non-extension of the Term shall not be deemed to be a
termination of this Agreement by the Company, and the Executive
shall not
be entitled to receive severance benefits or any other payment
pursuant to
this Agreement.
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 $300,000 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. The Executive will be eligible to receive a
bonus
with respect to 2006 and each later fiscal year ending during the
Term
computed in accordance with the provisions hereafter. If, with
respect to
any such fiscal year, the Company 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
--------------------------
--------------------------
89.9% and below
Nil
90-94.9
67.5%
95-99.9
71.25
100-105
78.75
105.1-110
82.5
110.1-115
86.25
115.1-120
90
120.1-125
93.75
125.1-130
97.5
130.1-135
101.25
135.1-140
105
140.1-145
108.75
145.1 and over
112.5
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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, 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 Compensation Committee of Parent's board of directors.
For the purposes of this Agreement, "Consolidated EBITDA" means for
any fiscal
year of CAC, consolidated net income for such fiscal year plus,
without
duplication and to the extent reflected as a charge in the
statement of such
consolidated net income for such fiscal year, the sum of (i) income
tax expense,
(ii) interest expense, amortization or write-off of debt discount
and debt
issuance costs and commissions (to the extent not already captured
in interest
expense), discounts and other fees and charges associated with
indebtedness,
(iii) depreciation and amortization expense (excluding amounts of
prepaid
incentives under customer contracts), (iv) any extraordinary
non-cash expenses
or losses, (v) any costs and expenses incurred in connection with
the
acquisition of CAC by Parent or an affiliate, (vi) any auditing,
legal,
reporting or administrative expenses incurred by CAC in complying
with the
Sarbanes-Oxley Act of 2002, as amended, or other reporting
obligations required
by securities laws applicable to publicly traded corporations
(except to the
extent such expenses are of a type historically charged to the
business in the
ordinary course), and (vii) all restructuring costs and minus (i)
to the extent
included in the statement of such consolidated net income for such
period, the
sum of (a) interest income, (b) any extraordinary or non-recurring
income or
gains (including, whether or not otherwise includable as a separate
item in the
statement of such consolidated net income for such period, gains on
the sales of
assets outside of the ordinary course of business), and (c) income
tax credits
(to the extent not netted from income tax expense) and (ii) any
cash payments
made during such period in respect of items described in clause
(iv) 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
net income,
all as determined on a consolidated basis, all of the foregoing to
be determined
by the Board or the Compensation Committee of Parent's board of
directors, as
applicable, with a view to consistency with management projections
disclosed as
presented to Parent in the Confidential Management Presentation
dated August
2005. For the purposes of determining compensation milestones for
any fiscal
year, Consolidated EBITDA will be adjusted by the Board or the
Compensation
Committee of Parent's board of directors, as applicable, as
appropriate for
material acquisitions or dispositions of any business or assets of
or by the
Company 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 Company's 2005 Long Term Incentive Plan
("LTIP"). The
Executive will receive 12% of the "LTIP bonus pool," as defined
4
in and in accordance with the LTIP (which will include a provision
that the
LTIP bonus pool will be 20% of Consolidated EBITDA achieved by CAC
in
excess of the target Consolidated EBITDA). 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.
3.3 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 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.
3.5 Fringe Benefits. During the Term, the Executive shall be
entitled
to all benefits for which the Executive shall he eligible under any
qualified pension plan, 401(k) plan, group insurance or other
so-called
"fringe" benefit plan which Clarke American provides to its
executive
employees generally.
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;
and (ii) a
pro rated Annual Bonus based on the number of days of the fiscal
year
worked by the Executive. The Executive shall have no further rights
to any
compensation (including any Base Salary or Annual Bonus) or any
other
benefits under this Agreement.
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, and (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, in each case less any other benefits
payable to
the Executive under any disability plan provided for hereunder or
otherwise
furnished to the Executive
5
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.
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) conviction of
the
Executive of any felony or any lesser crime or offense involving
the
property of the Company or any of its subsidiaries or affiliates,
(iii)
willful misconduct by the Executive in connection with the
performance of
any material portion of the Executive's duties hereunder, (iv)
commission
of any act of fraud, personal dishonesty, disloyalty or
defalcation, or
usurpation of a Company opportunity, (v) any act that has a
material
adverse effect upon the reputation of and/or the public confidence
in the
company, or (vi) failure to comply with a reasonable order, policy
or rule
that constitutes material insubord
