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EXHIBIT - 10.18A
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of September 9, 1998, by and
between WALLACE COMPUTER SERVICES, INC., a Delaware corporation, (hereinafter
called the "Corporation") and MICHAEL O. DUFFIELD, (hereinafter called the
"Executive").
WITNESSETH THAT:
WHEREAS, the Corporation desires to continue to employ the Executive as its
President, and the Executive desires to continue in such employment;
NOW, THEREFORE, the Corporation and the Executive, each intending to be
legally bound, hereby mutually covenant and agree as follows:
1. Employment and Term.
(a) Employment. The Corporation shall employ the Executive as the
President of the Corporation, and the Executive shall so serve, for the term set
forth in Paragraph 1(b).
(b) Term. The term of the Executive's employment under this Agreement
shall commence on September 9, 1998 and end on September 8, 2000, subject to the
extension of such term as hereinafter provided and subject to earlier
termination as provided in Paragraph 9. The term of this Agreement shall be
extended automatically for one (1) additional year as of September 9, 1999 and
each annual anniversary date thereof unless, no later than ninety (90) days
prior to any such renewal date, either the Board of Directors of the Corporation
(the "Board"), on behalf of the Corporation, or the Executive gives written
notice to the other, in accordance with Paragraph 16, that the term of this
Agreement shall not be so extended.
2. Duties. During the period of employment as provided in Paragraph 1(b)
hereof, the Executive shall serve as President of the Corporation and have all
powers and duties consistent with such positions, subject to the reasonable
direction of the Chief Executive Officer. The Executive shall devote
substantially his entire time during reasonable business hours (reasonable sick
leave and vacations excepted) and such additional time as is necessary to
fulfill faithfully, responsibly and to the best of his ability his duties
hereunder.
3. Salary.
(a) Base Salary. For services performed by the Executive for the
Corporation
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pursuant to this Agreement during the period of employment as provided in
Paragraph 1(b) hereof, the Corporation shall pay the Executive a base salary at
the rate of three hundred forty five thousand dollars ($345,000) per year,
payable in substantially equal installments in accordance with the Corporation's
regular payroll practices. The Executive's base salary (with any increases under
paragraph (b), below) shall not be subject to reduction. Any compensation which
may be paid to the Executive under any additional compensation or incentive plan
of the Corporation or which may be otherwise authorized from time to time by the
Board (or an appropriate committee thereof) shall be in addition to the base
salary to which the Executive shall be entitled under this Agreement.
(b) Salary Increases. During the period of employment as provided in
Paragraph 1(b) hereof, the base salary of the Executive shall be reviewed no
less frequently than annually by the Board to determine whether or not the same
should be increased in light of the duties and responsibilities of the Executive
and the performance thereof, and if it is determined that an increase is
merited, such increase shall be promptly put into effect and the base salary of
the Executive as so increased shall constitute the base salary of the Executive
for purposes of Paragraph 3(a).
4. Annual Bonuses. For each fiscal year during the term of employment, the
Executive shall be eligible to receive a cash bonus based on the Corporation's
achievement of certain operating and/or financial goals, with an annual target
bonus amount equal to 60% of the Executive's then current annual base salary, in
accordance with the terms of a bonus plan adopted and administered by the Board
for senior executives of the Corporation, which plan may be amended from time to
time by the Board in its discretion.
5. Payment of Bonuses. Whenever any annual bonus or any other cash bonus is
awarded to Executive, payment of such bonus shall be made in accordance with the
following provisions:
(a) Prior to the commencement of any fiscal year, Executive may advise
the Compensation Committee of the Board of his election to be paid any annual
bonus or any other cash bonus to be awarded to him for such fiscal year on a
current or deferred basis. If no such election is made, Executive shall be
deemed to have elected to be paid such bonus on a current basis.
(b) Any bonus payable on a current basis shall be paid to Executive
within sixty (60) days of the date of the award, subject to normal withholdings
and deductions.
(c) Any bonus payable on a deferred basis shall be accrued and paid to
Executive as follows:
(i) Effective as of the date of the award, the Corporation shall
credit the amount of any deferred bonus to the book reserve account known as the
"Deferred
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Compensation Account of Michael O. Duffield" (hereinafter referred to as the
"Deferred Compensation Account"). There shall also be credited to the Deferred
Compensation Account, effective as of the date hereof, all deferred bonuses and
interest accrued thereon credited to Executive prior to the date hereof.
(ii) Interest shall accrue on all amounts credited to the Deferred
Compensation Account from the date credited to such account until the date paid
to Executive as provided in paragraph (iii), below. Such interest shall be
computed quarterly on the last day of each calendar quarter based upon the
interest rate payable on ninety (90) day certificates of deposit of The First
National Bank of Chicago prevailing as of the first day of such calendar
quarter. Interest shall be credited to the Deferred Compensation Account, and
thereafter accrue interest as provided in this paragraph (ii), effective as of
the first day of each calendar year. Any other provision of this subparagraph
(ii) to the contrary notwithstanding, in the event the Corporation shall
implement deferred compensation provisions in connection with its incentive
compensation programs which provide for deferred payments thereunder in the form
of, or based on the rate of return of the Corporation's common stock, the
Executive shall be provided with a similar deferred payment opportunity with
regard to the Deferred Compensation Account.
(iii) The amounts of deferred bonus and other amounts credited to
the Deferred Compensation Account shall be paid to Executive, subject to normal
withholdings and deductions, in one hundred twenty (120) equal monthly
installments, with interest on the unpaid balance at the rate specified in
paragraph (ii), above, commencing in the month immediately following the
termination of Executive's employment with the Corporation; provided, however,
that if Executive should die before all amounts credited to the Deferred
Compensation Account have been paid to him, the full unpaid amount then credited
to the Deferred Compensation Account and all interest accrued thereon shall be
immediately paid in a lump sum to his designated beneficiary or, if no
beneficiary is designated, to his estate.
(d) Any other provision of this Agreement to the contrary
notwithstanding, Executive may at any time or from time to time request the
payment to him of all or any portion of the amounts then credited to the
Deferred Compensation Account, but the Corporation shall make a payment to
Executive pursuant to such a request only if and to the extent that such request
is approved by the Board.
(e) The Corporation shall designate the provisions of this Agreement
and the Change of Control Agreement (described in Paragraph 23 below) relating
to the Deferred Compensation Account as a "Plan" subject to the provisions of
the Wallace Computer Services, Inc. Benefit Trust (the "Benefit Trust").
6. Equity Incentive Compensation. During the term of employment hereunder
the Executive shall be eligible to participate, in an appropriate manner
relative to other senior executives of the Corporation, in any equity-based
incentive compensation plan or program approved by the Board from time to time,
including (but not by way of limitation) any plan
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providing for the granting of (a) options to purchase stock of the Corporation,
(b) restricted stock of the Corporation or (c) similar equity-based units or
interests.
7. Other Benefits. In addition to the compensation described in Paragraphs
3, 4 and 6, above, the Executive shall also be entitled to the following:
(a) Participation in Benefit Plans. The Executive shall be entitled to
participate in all of the various retirement, welfare, fringe benefit, executive
perquisite, and expense reimbursement plans, programs and arrangements of the
Corporation to the extent the Executive is eligible for participation under the
terms of such plans, programs and arrangements, except that the Executive shall
not participate in the Supplemental Retirement Plan of the Corporation.
(b) Uninsured Medical Expenses. Continuing until Executive's death, or
if later, the death of Executive's spouse, the Corporation shall reimburse
Executive upon request for expenses incurred by Executive for or in respect of
medical care (as defined in Section 213 of the Internal Revenue Code of 1986, as
amended (the "Code")) of Executive and his spouse; provided, however, that
Executive shall be entitled to reimbursement of medical expenses as set forth in
this paragraph (b) if and so long as (and only if and so long as) (i) Executive
does not, at any time while he is an employee of the Corporation or at any time
thereafter, violate the confidentiality, noncompetition or nonsolicitation
covenants set forth in Paragraph 8, below, and (ii) Executive does not commit
any action that would permit the Corporation to terminate his employment for
"Cause" (as defined in Paragraph 9(d)(ii), below). The Corporation may, in its
discretion, pay any such medical expenses directly in lieu of making
reimbursement therefor. The reimbursement or payment of such medical expenses on
behalf of Executive and/or his spouse shall be limited to an aggregate of
$500,000, and reimbursement or payment of such medical expenses shall be made by
the Corporation only in the event and to the extent that such reimbursement or
payment is not then provided under any insurance policy or policies, whether
owned by the Corporation or Executive, or under any other private or public
health and accident plan or program under which Executive or his spouse, as the
case may be, is then eligible for benefits; provided, however, that, if
Executive's employment terminates:
(i) Before his 55th birthday, there shall be no reimbursement or
payment of medical expenses on behalf of Executive and/or his spouse after his
employment terminates,
(ii) On or after his 55th but before his 60th birthday, the
reimbursement or payment of medical expenses on behalf of Executive and/or his
spouse shall be limited to an aggregate of $150,000, or
(iii) On or after his 60th but before his 65th birthday, the
reimbursement or payment of medical expenses on behalf of Executive and/or his
spouse shall be limited to an aggregate of $300,000.
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Upon the request of the Corporation, Executive shall submit to the Corporation
hospitalization, doctor, dental or other medical bills, including premium
notices for accident or health insurance, for verification by the Corporation.
(c) Supplemental Retirement Benefit. Except as described in paragraph
(ii), below, the Corporation shall pay to the Executive after the termination
of his employment a Supplemental Retirement Benefit ("SRB") determined and
paid as follows:
(i) The monthly amount of the SRB shall be the excess of (A) the
amount determined by multiplying (1) the Executive's Recent Average Monthly
Compensation (as described in paragraph (iii), below) by (2) the Executive's
Supplemental Retirement Percentage (as described in paragraph (ii), below) over
(B) the sum (but not to exceed 70% of the amount determined under the
immediately preceding clause (A)) of (1) the Executive's monthly Social Security
retirement benefits, if any, and (2) the monthly amount payable under a
single-life annuity for the Executive's life which is the actuarial equivalent
of the benefits payable to the Executive under any retirement or profit-sharing
plan or program provided by the Corporation, to the extent such benefits are
attributable to contributions by the Corporation other than contributions by the
Corporation on behalf of the Executive under a salary reduction agreement.
(ii) The Executive's Supplemental Retirement Percentage shall be
5% for each year of age attained by the Executive between the ages of 50 and 55
plus an additional 2.5% for each additional year of age attained by the
Executive after age 55, up to a maximum Supplemental Retirement Percentage of
50% upon attaining age 65; but the Supplemental Retirement Percentage shall be
0% if the Executive's employment with the Corporation and its subsidiaries
terminates prior to age 55 and such termination is for Cause (as defined in
Paragraph 9(d)(ii), below) or because of the Executive's resignation without
Good Reason (as defined in Paragraph 9(d)(v), below).
(iii) The Executive's Recent Average Monthly Compensation shall be
the monthly average of his cash compensation for the last 48 months of his
full-time employment by the Corporation. Cash compensation shall consist of
salary, current and deferred bonuses, and contributions paid on the Executive's
behalf by the Corporation pursuant to a salary reduction agreement but shall not
include amounts attributable to equity-participation awards or payments made
during that 48-month period pursuant to deferral from a previous period.
(iv) The SRB shall be payable in monthly installments for the life
of the Executive but in any event for a minimum period of 10 years after the
termination of employment. If the Executive dies before the completion of 120
monthly payments, the remaining payments shall be made to his designated
beneficiary or, if none is designated, to his estate. If the Executive dies
prior to termination of employment, the SRB shall be calculated as of the date
of the Executive's death and shall be paid for a period of 10 years to the
Executive's designated beneficiary or, if none is designated, to his estate.
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(v) The Corporation's shall designate the provisions of this
Agreement and the Change in Control Agreement relating to the SRB as a "Plan"
subject to the provisions of the Benefit Trust.
8. Covenants of the Executive. In order to induce the Corporation to enter
into this Agreement, the Executive hereby agrees as follows:
(a) Confidentiality. Except for and on behalf of the Corporation with
the consent of or as directed by the Board, the Executive shall keep
confidential and shall not divulge to any other person or entity, during the
term of employment or thereafter, any of the business secrets or other
confidential information regarding the Corporation and its subsidiaries which
has not otherwise become public knowledge; provided, however, that nothing in
this Agreement shall preclude the Executive from disclosing information (i) to
an appropriate extent to parties retained to perform services for the
Corporation or its subsidiaries or (ii) under any other circumstances to the
extent such disclosure is, in the reasonable judgment of the Executive,
appropriate or necessary to further the best interests of the Corporation or its
subsidiaries or (iii) as may be required by law.
(b) Records. All papers, books and records of every kind and
description relating to the business and affairs of the Corporation and its
subsidiaries, whether or not prepared by the Executive, other than personal
notes prepared by or at the direction of the Executive, shall be the sole and
exclusive property of the Corporation, and the Executive shall surrender them to
the Corporation at any time upon request by the Board.
(c) Noncompetition and Nonsolicitation. The Executive hereby agrees with
the Corporation that during the term of his employment hereunder, and in certain
instances, as provided below, for a period of two (2) years following
termination of his employment hereunder, (i) he shall not, directly or
indirectly, engage in, or be employed by, or act as a consultant to, or be a
director, officer, owner or partner of, or acquire a substantial interest in,
any business activity or entity which competes significantly with the
Corporation or any of its subsidiaries; provided that, after the termination of
his employment with the Corporation, "significant" competition shall not include
involvement in any line of business that contributes less than five percent (5%)
of the gross revenues of the Corporation and its subsidiaries or contributes
less than five percent (5%) of the gross revenues of another business entity or
activity with which Executive becomes associated, (ii) he shall not solicit any
employee of the Corporation or any of its subsidiaries to leave the employment
thereof or in any way interfere with the relationship of such employee with the
Corporation or its subsidiaries, unless he believes in good faith that such
action during the term of his employment by the Corporation is in the best
interests of the Corporation, and (iii) he shall not induce or attempt to induce
any customer, supplier, licensee or other individual, corporation or other
business organization having a business relation with the Corporation or its
subsidiaries to cease doing business with the Corporation or its subsidiaries or
in any way interfere with the relationship between any such
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customer, supplier, licensee or other person and the Corporation or its
subsidiaries; provided, however, that as to the period after termination of the
Executive's employment with the Corporation, the restrictive covenants set forth
in part (i) of this paragraph (c) shall apply only if such termination results
from the Executive's resignation without Good Reason (as defined in Paragraph
9(d)(v), below) or from discharge for Cause (as defined in Paragraph 9(d)(ii),
below).
(d) Enforcement. The Executive recognizes that the provisions of this
Paragraph 8 are vitally important to the continuing welfare of the Corporation
and its subsidiaries and that money damages would constitute an inadequate
remedy for any violation thereof. Accordingly, in the event of any such
violation by the Executive, the Corporation and its subsidiaries, in addition to
any other remedies they may have, shall have the right to compel specific
performance thereof or to seek an injunction restraining any action by the
Executive in violation of this Paragraph 8.
9. Termination. Unless earlier terminated in accordance with the following
provisions of this Paragraph 9, the Corporation shall continue to employ the
Executive and the Executive shall remain employed by the Corporation during the
entire term of this Agreement as set forth in Paragraph 1(b). Paragraph 10
hereof sets forth certain obligations of the Corporation in the event that the
Executive's employment hereunder is terminated. Certain capitalized terms used
in this Paragraph 9 and in Paragraph 10 hereof are defined in Paragraph 9(d),
below.
(a) Death or Disability. Except to the extent otherwise provided in
Paragraph 10 with respect to certain post-Date of Termination payment
obligations of the Corporation, this Agreement shall terminate immediately as of
the Date of Termination in the event of the Executive's death or in the event
that the Executive becomes disabled. The Executive will be deemed to be disabled
upon the earlier of (i) the end of a six (6)-consecutive month period, or of an
aggregate period of nine (9) months out of any consecutive twelve (12) months,
during which, by reason of physical or mental injury or disease, the Executive
has been unable to perform substantially all of his usual and customary duties
under this Agreement or (ii) the date that a reputable physician selected by the
Board, and as to whom the Executive has no reasonable objection, determines in
writing that the Executive will, by reason of physical or mental injury or
disease, be unable to perform substantially all of the Executive's usual and
customary duties under this Agreement for a period of at least six (6)
consecutive months. If any question arises as to whether the Executive is
disabled, upon reasonable request therefor by the Board, the Executive shall
submit to reasonable medical examination for the purpose of determining the
existence, nature and extent of any such disability. The Board shall promptly
give the Executive written notice of any such determination of the Executive's
disability and of any decision of the Board to terminate the Executive's
employment by reason thereof. In the event of disability, until the Date of
Termination, the base salary payable to the Executive under Paragraph 3 hereof
shall be reduced dollar-for-dollar by the amount of disability benefits, if any,
paid to the Executive in accordance with any disability policy or program of the
Corporation.
(b) Discharge for Cause. In accordance with the procedures hereinafter
set
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forth, the Board may discharge the Executive from his employment hereunder for
Cause. Except to the extent otherwise provided in Paragraph 10 with respect to
certain post-Date of Termination obligations of the Corporation, this Agreement
shall terminate immediately as of the Date of Termination in the event the
Executive is discharged for Cause. Any discharge of the Executive for Cause
shall be communicated by a Notice of Termination to the Executive given in
accordance with Paragraph 16 of this Agreement.
(c) Termination for Other Reasons. The Corporation may discharge the
Executive without Cause by giving written notice to the Executive in accordance
with Paragraph 16 at least thirty (30) days prior to the Date of Termination.
The Executive may resign from his employment, without liability to the
Corporation, by giving written notice to the Corporation in accordance with
Paragraph 16 at least thirty (30) days prior to the Date of Termination. Except
to the extent otherwise provided in Paragraph 10 with respect to certain
post-Date of Termination obligations of the Corporation, this Agreement shall
terminate immediately as of the Date of Termination in the event the Executive
is discharged without Cause or resigns.
(d) Definitions. For purposes of this Agreement, the following
capitalized terms shall have the meanings set forth below:
(i) "Accrued Obligations" shall mean, as of the Date of
Termination, the sum of (A) the Executive's base salary under Paragraph 3
through the Date of Termination to the extent not theretofore paid, (B) the
amount of any bonus, incentive compensation, deferred compensation and other
cash compensation accrued by the Executive as of the Date of Termination to the
extent not theretofore paid, (C) any vacation pay, expense reimbursements and
other cash entitlements accrued by the Executive as of the Date of Termination
to the extent not theretofore paid, and (D) all other benefits which have
accrued as of the Date of Termination, including any applicable retiree benefits
(including, but not by way of limitation, medical expense reimbursement benefits
under Paragraph 7(b), above, and supplemental retirement benefits under
Paragraph 7(c), above) and including any applicable life insurance or disability
insurance benefits. For the purpose of this Paragraph 9(d)(i), amounts shall be
deemed to accrue ratably over the period during which they are earned, but no
discretionary compensation shall be deemed earned or accrued until it is
specifically approved by the Board in accordance with the applicable plan,
program or policy.
(ii) "Cause" shall mean (A) the Executive's willful and continued
failure to perform substantially the duties of his employment; or (B) the
Executive's willful engaging in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Corporation; or (C) the Executive's
conviction of a felony involving moral turpitude, but specifically excluding any
conviction based entirely on vicarious liability (with "vicarious liability"
meaning liability based on acts of the Corporation for which the Executive is
charged solely as a result of his offices with the Corporation and in which he
was not directly involved and did not have prior knowledge of such actions or
intended actions); provided, however, that
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no act or failure to act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or omission was
in the best interests of the Corporation; and provided further that no act or
omission by the Executive shall constitute Cause hereunder unless the
Corporation has given detailed written notice thereof to the Executive, and the
Executive has failed to remedy such act or omission within 30 days after
receiving such notice. Termination for Cause must be evidenced by a specific
resolution adopted by at least a three-fourths vote of the Board after the
Executive is given an opportunity prior to the expiration of such 30-day period,
together with his legal counsel, to be heard before the Board.
(iii) "Change of Control" shall mean:
(A) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 35% or more of either (i) the then outstanding shares of capital stock of the
Corporation (the "Outstanding Corporation Capital Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Corporation Voting
Securities"); provided, however, that (X) any acquisition by or from the
Corporation or any of its subsidiaries, (Y) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Corporation or
any of its subsidiaries or (Z) any acquisition by any corporation with respect
to which, following such acquisition, more than 65% of the then outstanding
shares of capital stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Corporation Capital
Stock and Corporation Voting Securities immediately prior to such acquisition,
in substantially the same proportion as their ownership, immediately prior to
such acquisition, of the Outstanding Corporation Capital Stock and Corporation
Voting Securities, as the case may be, shall not constitute a Change of Control;
or
(B) Individuals who, as of September 6, 1995, constituted the
Board of Directors of the Corporation (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board; provided, however, that
any individual who becomes a member of the Board of Directors of the Corporation
subsequent to such date whose election, or nomination for election by the
stockholders of the Corporation, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be deemed to be a
member of the Incumbent Board; but provided further, that no individual whose
election or initial assumption of office as a director of the Corporation occurs
as a result of an actual or threatened election contest (as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) with
respect to the election or removal of directors, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any person
other
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than the Board of Directors of the Corporation, shall be deemed to be a member
of the Incumbent Board; or
(C) Approval by the stockholders of the Corporation of a
reorganization, merger or consolidation (a "Business Combination") with respect
to which all or substantially all of the individuals and entities who were the
respective beneficial owners of the Outstanding Corporation Capital Stock and
Corporation Voting Securities immediately prior to such Business Combination do
not, following such Business Combination, beneficially own, directly or
indirectly, more than 65% of, respectively, the then outstanding shares of
capital stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from the Business Combination, in
substantially the same proportion as their ownership immediately prior to such
Business Combination of the Outstanding Corporation Capital Stock and
Corporation Voting Securities, as the case may be; or
(D) Approval by the stockholders of the Corporation of a sale
or other disposition of all or substantially all of the assets of the
Corporation other than to a corporation with respect to which, following such
sale or disposition, more than 65% of, respectively, the then outstanding shares
of capital stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Corporation Capital Stock and Corporation Voting Securities
immediately prior to such sale or disposition, in substantially the same
proportion as their ownership of the Outstanding Corporation Capital Stock and
Corporation Voting Securities, as the case may be, immediately prior to such
sale or disposition; or
(E) A complete liquidation or dissolution of the Corporation.
Any other provision of this Agreement to the contrary notwithstanding, "Change
of Control" shall not include any transaction described in subparagraphs (A),
(C) or (D) of this paragraph (iii) where, in connection with such transaction,
the Executive or any party acting in concert with the Executive substantially
increases his or its, as the case may be, ownership interest in the Corporation
or a successor to the Corporation.
(iv) "Date of Termination" shall mean (A) in the event of a
discharge of the Executive by the Board for Cause, the date the Executive
receives a Notice of Termination, or any later date specified in such Notice of
Termination, as the case may be, (B) in the event of a discharge of the
Executive without Cause or a resignation by the Executive, the date specified in
the written notice to the Executive (in the case of discharge) or the
Corporation (in the case of resignation), which date shall be no less than
thirty (30) days from the date of such written notice, (C) in the event of the
Executive's death, the date of the Executive's death, and (D) in the event of
termination of the Executive's employment by reason of disability pursuant to
Paragraph 9(a), the date the Executive receives written notice of such
termination.
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(v) "Good Reason" shall mean the occurrence of any of the
following without the Executive's consent: (A) the failure to maintain the
Executive in the positions set forth in Paragraph 1(a) above; (B) the assignment
to the Executive of any duties inconsistent in any respect with the Executive's
positions with the Corporation as set forth in this Agreement (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Paragraph 2, or any action by the
Corporation which results in substantial diminution in such positions,
authority, duties or responsibilities, excluding for this purpose any isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Corporation promptly after receipt of written notice thereof
given by the Executive in accordance with Paragraph 16; or (C) any failure by
the Corporation to comply with any of the provisions of this Agreement, other
than any isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Corporation promptly after receipt of written
notice thereof given by the Executive in accordance with Paragraph 16; or (D)
the Corporation giving notice to the Executive pursuant to Paragraph 1(b) that
the term of this Agreement shall not be extended upon the expiration of the
then-current term; or (E) the Corporation requiring the Executive to be based at
an office or location which is more than 50 miles from the Executive's office as
of September 9, 1998; or (F) the Corporation giving notice to the Executive that
the term of the Change of Control Agreement which is described in Paragraph 23,
below, shall not be extended upon the expiration of its then current term.
(vi) "Notice of Termination" shall mean a written notice which (A)
indicates the specific termination provision in this Agreement relied upon, (B)
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated and (C) if the Date of Termination is to be other than the date of
receipt of such notice, specifies the termination date.
10. Obligations of the Corporation Upon Termination. The following
provisions describe the obligations of the Corporation to the Executive under
this Agreement upon termination of his employment. However, except as explicitly
provided in this Agreement, nothing in this Agreement shall limit or otherwise
adversely affect any rights which the Executive may have under applicable law,
under any other agreement with the Corporation or any of its subsidiaries, or
under any compensation or benefit plan, program, policy or practice of the
Corporation or any of its subsidiaries.
(a) Death, Disability, Discharge for Cause, or Resignation Without Good
Reason. In the event this Agreement terminates pursuant to Paragraph 9(a) by
reason of the death or disability of the Executive, or pursuant to Paragraph
9(b) by reason of the discharge of the Executive by the Corporation for Cause,
or pursuant to Paragraph 9(c) by reason of the resignation of the Executive
other than for Good Reason, the Corporation shall pay to the Executive, or his
heirs or estate, in the event of the Executive's death, all Accrued Obligations
in a lump sum in cash within thirty (30) days after the Date of Termination;
provided, however, that any portion of the Accrued Obligations which consists of
bonus, deferred compensation,
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incentive compensation, insurance benefits or other employee benefits shall be
determined and paid in accordance with the terms of the relevant plan or policy
as applicable to the Executive; and, provided further, that all long-term
incentive compensation awards (such as (i) options to purchase stock of the
Corporation, (ii) restricted stock of the Corporation, or (iii) similar
equity-based units or interests, shall, if not otherwise vested, vest in full
upon such termination of this Agreement due to death or disability.
(b) Discharge Without Cause or Resignation with Good Reason. In the
event that this Agreement terminates pursuant to Paragraph 9(c) by reason of the
discharge of the Executive by the Corporation other than for Cause or disability
or by reason of the resignation of the Executive for Good Reason:
(i) The Corporation shall pay all Accrued Obligations to the
Executive in a lump sum in cash within thirty (30) days after the Date of
Termination; provided, however, that any portion of the Accrued Obligations
which consists of bonus, deferred compensation, incentive compensation,
insurance benefits or other employee benefits shall be determined and paid in
accordance with the terms of the relevant plan or policy as applicable to the
Executive;
(ii) Within thirty (30) days after the Date of Termination, the
Corporation shall pay to the Executive a cash bonus for the year during which
termination occurs, calculated as a prorata portion of his then current target
annual bonus amount;
(iii) Continuation for a period of two (2) years of his then
current annual base salary and his then current target annual bonus amount, both
payable in substantially equal installments in accordance with the Corporation's
regular payroll practices;
(iv) For a period of two (2) years after the Date of Termination,
the Corporation shall continue to provide benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs and arrangements referred to in
Paragraph 7(a) of this Agreement if the Executive's employment with the
Corporation had continued for those two (2) years;
(v) All long-term incentive compensation awards to the Executive,
including (but not by way of limitation) all equity-based incentive compensation
awards (such as (A) options to purchase stock of the Corporation, (B) restricted
stock of the Corporation, or (C) similar equity-based units or interests) shall,
if not otherwise vested, vest in full upon such termination of this Agreement,
and Executive shall be considered to have terminated his employment by reason of
retirement for purposes of determining the exercise period applicable to any
options following such termination of this Agreement; and
(vi) The Corporation shall, at its sole expense, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive.
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11. Certain Additional Payments by the Corporation.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Corporation
to or for the benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Paragraph 11) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, (the "Code") or
if any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and penalties,
being hereinafter collectively referred to as 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),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) 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 Payment.
(b) Subject to the provisions of paragraph (c), below, all
determinations required to be made under this Paragraph 11, 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 then serving as the Corporation's independent
auditing firm (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Corporation and the Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Corporation. In the event
that the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant
to this Paragraph 11, shall be paid by the Corporation to the Executive within
five (5) days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with a written opinion that failure to report the
Excise Tax on the Executive's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty. Any good faith
determination by the Accounting Firm shall be binding upon the Corporation and
the Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Corporation should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Corporation
exhausts its remedies pursuant to paragraph (c), below, and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Corporation to or for the benefit of
the
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Executive.
(c) The Executive shall notify the Corporation in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Corporation of a Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than fifteen (15) business days after the
Executive is informed in writing of such claim and shall apprise the Corporation
of the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
thirty (30)-day period following the date on which Executive gives such notice
to the Corporation (or such shorter period ending on the date that any payment
of taxes with respect to such claim is due). If the Corporation notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) Give the Corporation any information reasonably requested
by the Corporation relating to such claim,
(ii) Take such action in connection with contesting such claim
as the Corporation shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Corporation,
(iii) Cooperate with the Corporation in good faith in order
effectively to contest such claim, and
(iv) Permit the Corporation to participate in any proceedings
relating to such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limiting the foregoing
provisions of this paragraph (c), the Corporation shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner; and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Corporation shall determine; provided, however, that if the Corporation directs
the Executive to pay such claim and sue for a refund, the Corporation shall
advance the amount of such payment to the Executive on an interest-free basis
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such
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advance or with respect to any imputed income with respect to such advance; and
further provided that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Corporation's control of the contest shall be limited
to issues with respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Corporation pursuant to paragraph (c), above, the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Corporation's complying with the requirements of said paragraph (c))
promptly pay to the Corporation the amount of such refund (together with any
interest paid or credited thereon, after taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Corporation pursuant
to said paragraph (c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Corporation does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid; and the amount
of such advance shall offset, to the extent thereof, the amount of the Gross-Up
Payment required to be paid.
12. No Mitigation. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement, and such
amounts shall not be reduced whether or not the Executive obtains other
employment.
13. Payment of Certain Expenses. The Corporation agrees to pay promptly
as incurred, to the fullest extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur in connection with the preparation of
this Agreement or as a result of any contest by the Corporation, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement (including as a result of any contest initiated by
the Executive about the amount of any payment due pursuant to this Agreement)
(together with an additional amount such that after payment by the Executive of
Executive's applicable Federal, state and local taxes on such additional amount,
Executive shall retain an amount equal to the total of Executive's applicable
Federal, state and local taxes arising due to the payment of legal fees and
expenses under this Paragraph 13), plus in each case interest on any delayed
payment at the interest rate applicable from time to time under the
Corporation's primary revolving credit agreement, or in the absence of such a
rate, at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Code; provided, however, that the Corporation shall not be obligated to make
such payment of fees and expenses with respect to any contest in which the
Corporation prevails over the Executive.
14. Indemnification. To the fullest extent permitted by law, the
Corporation shall,
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during and after the Executive's term of employment, indemnify the Executive
(including the advancement of expenses) for any judgments, fines, amounts paid
in settlement and reasonable expenses, including attorneys' fees, incurred by
the Executive in connection with the defense of any lawsuit or other claim to
which he is made a party by reason of being or having been an officer, director
or employee of the Corporation or any of its subsidiaries.
15. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the heirs and representatives of the Executive and the successors
and assigns of the Corporation. The Corporation shall require any successor
(whether direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) to all or a
substantial portion of its assets, by agreement in form and substance reasonably
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform this Agreement if no such succession had taken place.
Regardless of whether such an agreement is executed, this Agreement shall be
binding upon any successor of the Corporation in accordance with the operation
of law, and such successor shall be deemed the "Corporation" for purposes of
this Agreement.
16. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or by reputable commercial delivery service or mailed within
the continental United States by first class certified mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to the Board or the Corporation, to:
Wallace Computer Services, Inc.
2275 Cabot Drive
Lisle, Illinois 60532
Attention: Corporate Secretary
(b) If to the Executive, to:
Mr. Michael O. Duffield
3106 Turnberry Road
St. Charles, IL 60174
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
17. Tax Withholding. The Corporation shall provide for the withholding of
any taxes
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required to be withheld by federal, state, or local law with respect to any
payment in cash, shares of stock and/or other property made by or on behalf of
the Corporation to or for the benefit of the Executive under this Agreement or
otherwise. The Corporation may, at its option: (a) withhold such taxes from any
cash payments owing from the Corporation to the Executive, (b) require the
Executive to pay to the Corporation in cash such amount as may be required to
satisfy such withholding obligations and/or (c) make other satisfactory
arrangements with the Executive to satisfy such withholding obligations.
18. Arbitration. Except as to actions described in Paragraph 8(d), any
controversy or claim arising out of or relating to this Agreement or the breach
hereof shall be settled by arbitration in Chicago, Illinois in accordance with
the laws of the State of Illinois, without regard to the choice of law
provisions of such laws. The arbitration shall be conducted in accordance with
the rules of the American Arbitration Association before an arbitrator appointed
by the then President of The Chicago Bar Association. The costs and expenses of
the arbitrator shall be borne by the Corporation. The award of the arbitrator
shall be binding upon the parties. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
19. No Assignment. Except as otherwise expressly provided herein, this
Agreement is not assignable by any party and no payment to be made hereunder
shall be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or other charge.
20. Execution in Counterparts. This Agreement may be executed by the
parties hereto in two (2) or more counterparts, each of which shall be deemed to
be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
21. Jurisdiction and Governing Law. Except as provided in Paragraph 18,
jurisdiction over disputes with regard to this Agreement shall be exclusively in
the courts of the State of Illinois, and this Agreement shall be construed and
interpreted in accordance with and governed by the laws of the State of
Illinois, without regard to the choice of laws provisions of such laws.
22. Severability. If any provision of this Agreement shall be adjudged by
any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement. Furthermore, if the scope of any restriction or requirement
contained in this Agreement is too broad to permit enforcement of such
restriction or requirement to its full extent, then such restriction or
requirement shall be enforced to the maximum extent permitted by law, and the
Executive consents and agrees that any court of competent jurisdiction may so
modify such scope in any proceeding brought to enforce such restriction or
requirement.
23. Effect of Change of Control. Upon the occurrence of a Change of Control
(as defined in Paragraph 9(d)(iii), above), this Agreement shall automatically
terminate and be
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superseded by a separate Change of Control Agreement made and entered into as of
September 9, 1998 by the Executive and the Corporation, in substantially the
form attached hereto as Exhibit A.
24. Prior Understandings. This Agreement embodies the entire understanding
of the parties hereto, and supersedes all prior oral or written agreements or
understandings between them, regarding the subject matter hereof. No change,
alteration or modification hereof may be made except in a writing, signed by
each of the parties hereto. The headings in this Agreement are for convenience
and reference only and shall not be construed as part of this Agreement or to
limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
Attest: WALLACE COMPUTER SERVICES, INC.
By:
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Title: Chairman of the Compensation Committee
MICHAEL O. DUFFIELD
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