EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT, dated as of October 31, 2005, between
Security
Printing, Inc., a Delaware corporation ("SPI"), CA Investment
Corp., a Delaware
corporation (together with SPI, the "Company"), and Alan Westfall
(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 President and Chief Executive Officer,
Checks In The
Mail 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 Texas,
subject to reasonable travel requirements on behalf of the Company.
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 (and
subject to) the consummation of the transaction contemplated by the
Stock
Purchase Agreement dated as of the date hereof, by and between M
& F Worldwide
Corp. (the "Parent") and Honeywell International Inc. (the date of
consummation
of the transaction being referred to herein as 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
2.2 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.
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 $275,000 (effective January 1,
2006) 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; provided,
that, prior
to January 1, 2006, the Base Salary shall be at same rate as in
effect on the
date hereof.
3.2 Incentive Compensation.
3.2.1 Annual Bonus. For fiscal year 2005, the Executive's
bonus, if any, shall be determined by the Board in its sole
discretion in
accordance with the SPI bonus plan in which the Executive
participates in
effect on the date hereof. Commencing with the 2006 fiscal year,
the
Executive will be eligible to receive a bonus with respect to the
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
PERCENTAGE
EBITDA IN BUSINESS PLAN
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
3
PERCENTAGE OF CONSOLIDATED
PERCENTAGE
EBITDA IN BUSINESS PLAN
OF BASE SALARY
---------------------------------
--------------------
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
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 SPI, 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 SPI by Parent or an affiliate, (vi) any auditing,
legal,
reporting or administrative expenses incurred by SPI 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
4
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 Long Term Incentive
Plan
("LTIP"), which shall be adopted by the Effective Date. The
Executive will
receive 7% of the "LTIP bonus pool," as defined 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 SPI 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 be eligible
under any
qualified pension plan, 401(k) plan, group insurance or other
so-called "fringe"
benefit plan which Checks In The Mail 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.
5
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 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 insubordination.
4.4 Termination by Company without Cause. If the Executive's
employment is terminated by the Company without Cause (other than
b
