Exhibit 10.5
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement, dated as of October
1, 1998, and amended and restated as of March 8, 2000 (the "Restatement Date"),
by and between Cendant Corporation, a Delaware corporation ("Cendant") and John
W. Chidsey (the "Executive").
WHEREAS, Cendant desires to employ the Executive as Chairman and
Chief Executive Officer, Cendant Direct Marketing Division, and the Executive
desires to serve Cendant in such capacity.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
SECTION I
EMPLOYMENT
Cendant agrees to employ the Executive and the Executive agrees to be
employed by Cendant for the Period of Employment as provided in Section III
below and upon the terms and conditions provided in this Agreement.
SECTION II
POSITION AND RESPONSIBILITIES
During the Period of Employment, the Executive will serve as
Chairman and Chief Executive Officer, Cendant Direct Marketing Division, and
subject to the direction of the Chief Executive Officer of Cendant (the "CEO"),
will perform such duties and exercise such supervision with regard to the
business of Cendant as are associated with such position, as well as such
additional duties as may be reasonably prescribed from time to time by the Board
of Directors of Cendant (the "Board") and/or the CEO. Cendant acknowledges that
such position is equivalent to the position of Vice Chairman of Cendant
Corporation for purposes of employee benefits, officer perquisites, officer
indemnification and compensation. The Executive will, during the Period of
Employment, devote substantially all of his time and attention during normal
business hours to the performance of services for Cendant. The Executive will
maintain a primary office and conduct his business in Parsip-
pany, New Jersey (the "Business Office"), except for normal and reasonable
business travel in connection with his duties hereunder, it being understand
that the Executive may be required to spend a reasonable portion of his time in
Cendant's Stamford, Connecticut offices.
SECTION III
PERIOD OF EMPLOYMENT
The period of the Executive's employment under this Agreement (the
"Period of Employment") will end on December 31, 2001, subject to extension or
termination as provided in this Agreement.
SECTION IV
COMPENSATION AND BENEFITS
A. COMPENSATION.
For all services rendered by the Executive pursuant to this Agreement
during the Period of Employment, including services as an executive, officer,
director or committee member of Cendant or any subsidiary or affiliate of
Cendant, the Executive will be compensated as follows:
i. BASE SALARY.
Effective as of January 1, 1999, Cendant will pay the Executive a
fixed base salary ("Base Salary") of not less than $650,000, per annum, and as
of January 1, 2000 will be eligible to receive annual increases as the Board
deems appropriate, in accordance with Cendant's customary procedures regarding
the salaries of senior officers, but with due consideration given to the
published Consumer Price Index applicable to the New York/New Jersey greater
metropolitan area. Base Salary will be payable according to the customary
payroll practices of Cendant, but in no event less frequently than once each
month.
ii. ANNUAL INCENTIVE AWARDS
The Executive will be eligible for discretionary annual incentive
compensation awards; PROVIDED, that the Executive will be eligible to receive an
annual bonus for each fiscal year of Cendant during the Period of Employment
based upon a target bonus equal to 100% of Base Salary, subject to Cendant's
attainment of
applicable performance targets established and certified by the Compensation
Committee of the Board (the "Committee"). The parties acknowledge that it is
currently contemplated that such performance targets will be stated in terms of
"earnings before interest and taxes" of Cendant, however such targets may relate
to such other financial and business criteria of Cendant or any of its
subsidiaries or business units as determined by the Committee in its sole
discretion (each such annual bonus, an "Incentive Compensation Award").
iii. LONG-TERM INCENTIVE AWARDS
The Executive will be eligible for annual stock option awards,
subject to the sole discretion of the Committee.
iv. ADDITIONAL BENEFITS
The Executive will be entitled to participate in all other
compensation and employee benefit plans or programs and receive all benefits and
perquisites for which salaried employees of Cendant generally are eligible under
any plan or program now in effect, or later established by Cendant, on the same
basis as similarly situated senior executives of Cendant with comparable duties
and responsibilities. The Executive will participate to the extent permissible
under the terms and provisions of such plans or programs, and in accordance with
the terms of such plans and program. Without limiting the generality of the
foregoing, Cendant acknowledges that, subject to the approval of the Committee,
it may implement a supplemental life insurance program (the "Insurance Program")
intended to provide senior executive officers with life insurance with a death
benefit of up to $5,000,000. Subject to the establishment of the Insurance
Program, the Executive shall participate in the Insurance Program on terms no
less favorable than applicable to any other senior executive officer of Cendant.
B. OTHER COMPENSATION.
Subject to the approval of the Committee, as soon as practicable,
Cendant shall amend the terms of each option to purchase shares of Cendant
common stock previously granted to the Executive which is indicated on Annex A
hereto, to provide that each such option shall, effective as of the expiration
or termination of the Period of Employment (other than an expiration or
termination of the Period of Employment in connection with a Termination for
Cause (as defined be-
low)), become fully vested and exercisable, and remain outstanding and
exercisable until the original expiration date of such option.
SECTION V
BUSINESS EXPENSES
Cendant will reimburse the Executive for all reasonable travel and
other expenses incurred by the Executive in connection with the performance of
his duties and obligations under this Agreement. The Executive will comply with
such limitations and reporting requirements with respect to expenses as may be
established by Cendant from time to time and will promptly provide all
appropriate and requested documentation in connection with such expenses.
SECTION VI
DISABILITY
A. If the Executive becomes Disabled, as defined below, during the Period
of Employment, the Period of Employment may be terminated at the option of the
Executive upon notice of resignation to Cendant, or at the option of Cendant
upon notice of termination to the Executive. Cendant's obligation to make
payments to the Executive under this Agreement will cease as of such date of
termination, except for earned but unpaid Base Salary, any earned but unpaid
Incentive Compensation Awards and the Extended Benefits (as defined below). In
such event, each of the Executive's then outstanding options to purchase shares
of Cendant common stock which was granted on or after the Restatement Date will
become immediately and fully vested and exercisable and, notwithstanding any
term or provision relating to such option to the contrary, shall remain
exercisable until the original expiration date of such option. For purposes of
this Agreement, "Disabled" means the Executive's inability to perform his duties
hereunder as a result of serious physical or mental illness or injury for a
period of no less than 180 days, together with a determination by an independent
medical authority that (i) the Executive is currently unable to perform such
duties and (ii) in all reasonable likelihood such disability will continue for a
period in excess of an additional 90 days. Such medical authority shall be
mutually and reasonably agreed upon by Cendant and the Executive and such
opinion shall be binding on Cendant and the Executive.
SECTION VII
DEATH
In the event of the death of the Executive during the Period of
Employment, the Period of Employment will end and Cendant's obligation to make
payments under this Agreement will cease as of the date of death, except for
earned but unpaid Base Salary, any earned but unpaid Incentive Compensation
Awards, which will be paid to the Executive's surviving spouse, estate or
personal representative, as applicable, and the Extended Benefits. In addition,
in such event, each of the Executive's then outstanding options to purchase
shares of Cendant common stock which was granted on or after the Restatement
Date will become immediately and fully vested and exercisable and,
notwithstanding any term or provision relating to such options to the contrary,
shall remain exercisable (by the Executive's beneficiary or estate, as provided
in any applicable option plan or agreement) until the original expiration date
of such option.
SECTION VIII
EFFECT OF TERMINATION OF EMPLOYMENT
A. WITHOUT CAUSE TERMINATION AND CONSTRUCTIVE DISCHARGE. If the
Executive's employment terminates due to either a Without Cause Termination or a
Constructive Discharge during the Period of Employment (i) Cendant will pay the
Executive upon such termination a lump sum amount equal to the product of (A)
the sum of the Executive's then current Base Salary and the Executive's target
Incentive Compensation Award for the year in which such termination occurs,
multiplied by (B) 300%, (ii) Cendant will pay the Executive upon such
termination any and all Base Salary and Incentive Compensation Awards earned but
unpaid through the date of such termination, (iii) each of the Executive's then
outstanding options to purchase shares of Cendant common stock which was granted
on or after the Restatement Date will become immediately and fully vested and
exercisable (if not already vested and exercisable) as of the date of such
termination and, notwithstanding any term or provision relating to such options
to the contrary, shall remain exercisable until the original expiration date of
such option and (iv) the Executive will receive the Extended Benefits.
B. TERMINATION FOR CAUSE; RESIGNATION. If the Executive's employment
terminates due to a Termination for Cause or a Resignation (other than a
Resignation under paragraph C of this Section VIII), Base Salary and any
Incentive
Compensation Awards earned but unpaid as of the date of such termination will be
paid to the Executive in a lump sum. Each outstanding stock options held by the
Executive as of the date of termination will be treated in accordance with its
terms. Except as provided in this paragraph, Cendant will have no further
obligations to the Executive hereunder.
C. RESIGNATION AFTER EXPIRATION OF PERIOD OF EMPLOYMENT. If each of
(i) the Executive's employment terminates due to a Resignation at any time
following the expiration of the Period of Employment, as extended from time to
time and (ii) Cendant does not offer to extend the Period of Employment on terms
and conditions either (A) substantially equivalent to the then existing terms
and conditions applicable to his employment or (B) no less favorable in the
aggregate than the terms and conditions applicable to the employment of any
other senior officer of Cendant (other than the Chief Executive Officer), then
(1) Cendant will pay the Executive an amount equal to the Executive's then
current Base Salary and (2) each of the Executive's then outstanding options to
purchase shares of Cendant common stock which were granted on or after the date
hereof, whether or not then vested, will become immediately vested (to the
extent not already vested) as of the date of such termination and will,
notwithstanding any term or provision relating to such options to the contrary,
remain exercisable until the original expiration date of such option. In
addition, upon any Resignation following the expiration of the Period of
Employment, the Executive will receive the Extended Benefits.
D. For purposes of this Agreement, the following
terms have the following meanings:
i. "Termination for Cause" means (i) the Executive's willful failure to
substantially perform his duties as an employee of Cendant or any subsidiary
(other than any such failure resulting from incapacity due to physical or mental
illness), (ii) any act of fraud, misappropriation, dishonesty, embezzlement or
similar conduct against Cendant or any subsidiary, (iii) the Executive's
conviction of a felony or any crime involving moral turpitude (which conviction,
due to the passage of time or otherwise, is not subject to further appeal) or
(iv) the Executive's gross negligence in the performance of his duties.
ii. "Constructive Discharge" means (i) any material failure of Cendant to
fulfill its obligations under this Agreement (including without limitation any
reduction of the Base Salary, as the same may be increased during the Period of
Employment, or other element of compensation) or (ii) the Business Office is
relocated to
any location which is both (A) more than 30 miles from the city limits of
Parsippany, New Jersey and (B) outside of the borough of Manhattan, New York
City. The Executive will provide Cendant a written notice which describes the
circumstances being relied on for the termination with respect to this Agreement
within thirty (30) days after the event giving rise to the notice. Cendant will
have thirty (30) days after receipt of such notice to remedy the situation prior
to the termination for Constructive Discharge.
iii. "Without Cause Termination" or "Terminated Without Cause" means
termination of the Executive's employment by Cendant other than due to death,
disability, or Termination for Cause.
iv. "Resignation" means a termination of the Executive's employment by
the Executive, other than in connection with a Constructive Discharge.
v. "Extended Benefits" means health and dental insurance benefits under
the applicable employee benefit plan sponsored by Cendant (or any other
comparable plan or arrangement) for the Executive and his covered dependents for
a period of three years following the Executive's termination of employment,
subject to the terms of the applicable employee benefit plan and applicable law,
and further subject to the payment by the Executive of applicable employee
premium contributions, co-payments, deductibles and similar costs.
D. CONDITIONS TO PAYMENT AND ACCELERATION. All payments and benefits
due to the Executive under this Section VIII shall be made as soon as
practicable; PROVIDED, HOWEVER, that such payments and benefits shall be subject
to, and contingent upon, the execution by the Executive (or his beneficiary or
estate) of a release of claims against Cendant and its affiliates in such form
determined by Cendant in its sole discretion. The payments due to the Executive
under this Section VIII shall be in lieu of any other severance benefits
otherwise payable to the Executive under any severance plan of Cendant or its
affiliates. To the extent any term or condition of any option to purchase
Cendant common stock conflicts with any term or condition of this Agreement
applicable to such option, the term or condition set forth in this Agreement
shall govern.
SECTION IX
OTHER DUTIES OF THE EXECUTIVE
DURING AND AFTER THE PERIOD OF EMPLOYMENT
A. The Executive will, with reasonable notice during or after the
Period of Employment, furnish information as may be in his possession and fully
cooperate with Cendant and its affiliates as may be requested in connection with
any claims or legal action in which Cendant or any of its affiliates is or may
become a party. After the Period of Employment, the Executive will cooperate as
reasonably requested with Cendant and its affiliates in connection with any
claims or legal actions in which Cendant or any of its affiliates is or may
become a party. Cendant agrees to reimburse the Executive for any reasonable
out-of-pocket expenses incurred by Executive by reason of such cooperation,
including any loss of salary, and Cendant will make reasonable efforts to
minimize interruption of the Executive's life in connection with his cooperation
in such matters as provided for in this paragraph
B. The Executive recognizes and acknowledges that all information
pertaining to this Agreement or to the affairs; business; results of operations;
accounting methods, practices and procedures; members; acquisition candidates;
financial condition; clients; customers or other relationships of Cendant or any
of its affiliates ("Information") is confidential and is a unique and valuable
asset of Cendant or any of its affiliates. Access to and knowledge of certain of
the Information is essential to the performance of the Executive's duties under
this Agreement. The Executive will not during the Period of Employment or
thereafter, except to the extent reasonably necessary in performance of his
duties under this Agreement, give to any person, firm, association, corporation,
or governmental agency any Information, except as may be required by law. The
Executive will not make use of the Information for his own purposes or for the
benefit of any person or organization other than Cendant or any of its
affiliates. The Executive will also use his best efforts to prevent the
disclosure of this Information by others. All records, memoranda, etc. relating
to the business of Cendant or its affiliates, whether made by the Executive or
otherwise coming into his possession, are confidential and will remain the
property of Cendant or its affiliates.
C. i. During the Period of Employment and for a one year period
thereafter (the "Restricted Period"), irrespective of the cause, manner or time
of any termination, the Executive will not use his status with Cendant or any of
its affiliates to obtain loans, goods or services from another organization on
terms that
would not be available to him in the absence of his relationship to Cendant or
any of its affiliates.
ii. During the Restricted Period, the Executive will not make any
statements or perform any acts intended to advance the interest of any existing
competitors (or any entity which the Executive knows to be a prospective
competitor) of the direct marketing business of Cendant or any of its affiliates
or in any way injuring the interests of the direct marketing business of Cendant
or any of its affiliates. During the Restricted Period, the Executive, without
prior express written approval by the Board, will not engage in, or directly or
indirectly (whether for compensation or otherwise) own or hold proprietary
interest in, manage, operate, or control, or join or participate in the
ownership, management, operation or control of, or furnish any capital to or be
connected in any manner with, any party which competes in any way or manner with
the business of the direct marketing business of Cendant or any of its
affiliates, as such business or businesses may be conducted from time to time,
either as a general or limited partner, proprietor, common or preferred
shareholder, officer, director, agent, employee, consultant, trustee, affiliate,
or otherwise. The Executive acknowledges that the direct marketing business of
Cendant's and its affiliates' businesses are conducted nationally and
internationally and agrees that the provisions in the foregoing sentence will
operate throughout the United States and the world.
iii. During the Restricted Period, the Executive, without express prior
written approval from the Board, will not solicit any members or the
then-current clients of Cendant or any of its affiliates for any existing
business of Cendant or any of its affiliates or discuss with any employee of
Cendant or any of its affiliates information or operation of any business
intended to compete with Cendant or any of its affiliates.
iv. During the Restricted Period, the Executive will not interfere with
the employees or affairs of Cendant or any of its affiliates or solicit or
induce any person who is an employee of Cendant or any of its affiliates to
terminate any relationship such person may have with Cendant or any of its
affiliates, nor will the Executive during such period directly or indirectly
engage, employ or compensate, or cause or permit any person (if such person is
within the Executive's control) with which the Executive may be affiliated, to
engage, employ or compensate, any employee of Cendant or any of its affiliates.
The Executive hereby represents and warrants that the Executive has not entered
into any agreement, understanding or arrangement with any employee of Cendant or
any of its affiliates pertaining to any business in
which the Executive has participated or plans to participate, or to the
employment, engagement or compensation of any such employee.
v. For the purposes of this Agreement, proprietary interest means legal or
equitable ownership, whether through stock holding or otherwise, of an equity
interest in a business, firm or entity or ownership of more than 5% of any class
of equity interest in a publicly-held company and the term "affiliate" will
include without limitation all subsidiaries and licensees of Cendant.
D. The Executive hereby acknowledges that damages at law may be an
insufficient remedy to Cendant if the Executive violates the terms of this
Agreement and that Cendant will be entitled, upon making the requisite showing,
to preliminary and/or permanent injunctive relief in any court of competent
jurisdiction to restrain the breach of or otherwise to specifically enforce any
of the covenants contained in this Section IX without the necessity of showing
any actual damage or that monetary damages would not provide an adequate remedy.
Such right to an injunction will be in addition to, and not in limitation of,
any other rights or remedies Cendant may have. Without limiting the generality
of the foregoing, neither party will oppose any motion the other party may make
for any expedited discovery or hearing in connection with any alleged breach of
this Section IX.
E. The period of time during which the provisions of this Section IX
will be in effect will be extended by the length of time during which the
Executive is in breach of the terms hereof as determined by any court of
competent jurisdiction on Cendant's application for injunctive relief.
F. The Executive agrees that the restrictions contained in this
Section IX are an essential element of the compensation the Executive is granted
hereunder and but for the Executive's agreement to comply with such
restrictions, Cendant would not have entered into this Agreement.
SECTION X
INDEMNIFICATION
Cendant will indemnify the Executive to the fullest extent permitted by
the laws of the state of Cendant's incorporation in effect at that time, or the
certificate of incorporation and by-laws of Cendant, whichever affords the
greater protection to the Executive.
SECTION XI
CERTAIN TAXES
In the event that the Executive becomes entitled to any benefits or
payments pursuant to this Agreement or otherwise in connection with a change in
the control of Cendant or the Executive's termination of employment with Cendant
(such benefits or payments excluding the Gross-Up Payment collectively, the
"Total Payments") that are subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes,
including any interest or penalties imposed with respect to such taxes, and
including any federal, state and local income taxes and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Total Payments. All determinations
required to be made under this Section XI, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the
accounting firm which was, immediately prior to the applicable change in the
control of Cendant, Cendant's independent auditor.
SECTION XII
MITIGATION
The Executive will not be required to mitigate the amount of any
payment provided for hereunder by seeking other employment or otherwise, nor
will the amount of any such payment be reduced by any compensation earned by the
Executive as the result of employment by another employer after the date the
Executive's employment hereunder terminates.
SECTION XIII
WITHHOLDING TAXES
The Executive acknowledges and agrees that Cendant may directly or
indirectly withhold from any payments under this Agreement all federal, state,
city or other taxes that will be required pursuant to any law or governmental
regulation.
SECTION XIV
EFFECT OF PRIOR AGREEMENTS
This Agreement will supersede any prior employment agreement between
Cendant and the Executive hereof, including, without limitation, that certain
letter agreement between Cendant and the Executive dated as of April 30, 1998
(but excluding the Memorandum to the Executive from Henry R. Silverman dated as
of January 15, 1998 regarding certain compensation arrangements applicable in
1998) and any such prior employment agreement will be deemed terminated without
any remaining obligations of either party thereunder.
SECTION XV
CONSOLIDATION, MERGER OR SALE OF ASSETS
Nothing in this Agreement will preclude Cendant from consolidating
or merging into or with, or transferring all or substantially all of its assets
to, another corporation which assumes this Agreement and all obligations and
undertakings of Cendant hereunder. Upon such a consolidation, merger or sale of
assets the term "Cendant" will mean the other corporation and this Agreement
will continue in full force and effect.
SECTION XVI
MODIFICATION
This Agreement may not be modified or amended except in writing
signed by the parties. No term or condition of this Agreement will be deemed to
have been waived except in writing by the party charged with waiver. A waiver
will operate only as to the specific term or condition waived and will not
constitute a waiver for the future or act on anything other than that which is
specifically waived.
SECTION XVII
GOVERNING LAW
This Agreement has been executed and delivered in the State of New
Jersey and its validity, interpretation, performance and enforcement will be
governed by the internal laws of that state.
SECTION XVIII
ARBITRATION
A. Any controversy, dispute or claim arising out of or relating to
this Agreement or the breach hereof which cannot be settled by mutual agreement
(other than with respect to the matters covered by Section IX for which Cendant
may, but will not be required to, seek injunctive relief) will be finally
settled by binding arbitration in accordance with the Federal Arbitration Act
(or if not applicable, the applicable state arbitration law) as follows: Any
party who is aggrieved will deliver a notice to the other party setting forth
the specific points in dispute. Any points remaining in dispute twenty (20) days
after the giving of such notice may be submitted to arbitration in New York, New
York, to the American Arbitration Association, before a single arbitrator
appointed in accordance with the arbitration rules of the American Arbitration
Association, modified only as herein expressly provided. After the aforesaid
twenty (20) days, either party, upon ten (10) days notice to the other, may so
submit the points in dispute to arbitration. The arbitrator may enter a default
decision against any party who fails to participate in the arbitration
proceedings.
B. The decision of the arbitrator on the points in dispute will be
final, unappealable and binding, and judgment on the award may be entered in any
court having jurisdiction thereof.
C. Except as otherwise provided in this Agreement, the arbitrator
will be authorized to apportion its fees and expenses and the reasonable
attorneys' fees and expenses of any such party as the arbitrator deems
appropriate. In the absence of any such apportionment, the fees and expenses of
the arbitrator will be borne equally by each party, and each party will bear the
fees and expenses of its own attorney.
D. The parties agree that this Section XVIII has been included to
rapidly and inexpensively resolve any disputes between them with respect to this
Agreement, and that this Section XVIII will be grounds for dismissal of any
court action commenced by either party with respect to this Agreement, other
than post-arbitration actions seeking to enforce an arbitration award. In the
event that any court determines that this arbitration procedure is not binding,
or otherwise allows any litigation regarding a dispute, claim, or controversy
covered by this Agreement to proceed, the parties hereto hereby waive any and
all right to a trial by jury in or with respect to such litigation.
E. The parties will keep confidential, and will not disclose to any
person, except as may be required by law, the existence of any controversy
hereunder, the referral of any such controversy to arbitration or the status or
resolution thereof.
SECTION XIX
SURVIVAL
Sections IX, X, XI, XII, XIII and XVIII will continue in full force
in accordance with their respective terms notwithstanding any termination of the
Period of Employment.
SECTION XX
SEPARABILITY
All provisions of this Agreement are intended to be severable. In
the event any provision or restriction contained herein is held to be invalid or
unenforceable in any respect, in whole or in part, such finding will in no way
affect the validity or enforceability of any other provision of this Agreement.
The parties hereto further agree that any such invalid or unenforceable
provision will be deemed modified so that it will be enforced to the greatest
extent permissible under law, and to the extent that any court of competent
jurisdiction determines any restriction herein to be unreasonable in any
respect, such court may limit this Agreement to render it reasonable in the
light of the circumstances in which it was entered into and specifically enforce
this Agreement as limited.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
CENDANT CORPORATION
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By: Henry R. Silverman
Title: President & Chief
Executive Officer
JOHN W. CHIDSEY
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