Severance Agreement - American Greetings Corp. and Jon Groetzinger Jr.
CONFIDENTIAL
AGREEMENT
This Agreement ("Agreement") is made this 8th day of April 2003,
between Jon Groetzinger, Jr. ("Groetzinger") and American Greetings Corporation
("AG" or "Company").
In consideration of the mutual promises contained herein, the parties
agree as follows:
1. Term. This Agreement will be in effect from April 1, 2003, until
March 31, 2006.
2. Position. Groetzinger is employed by AG as the Company's Senior Vice
President, General Counsel and Secretary. Until September 30, 2003, Groetzinger
will perform any and all duties commensurate with that position, including
without limitation, assisting in the hiring of a new General Counsel and orderly
transition following that hiring if the hiring occurs prior to September 30,
2003; provided he shall also be allowed to engage in outplacement and other job
seeking activities during this period.
3. End of Active Employment. If not sooner terminated by AG for cause,
on September 30, 2003, Groetzinger will end his active employment with AG ("End
Date"), except for purposes of qualifying for, and determining contributions
for, health care benefits pursuant to subparagraph 4.b.ii. below for which
Groetzinger will be considered an active employee until March 31, 2006. As of
the End Date, Groetzinger will not be entitled to or receive any benefits or
privileges of employment or post-employment, except for those specifically
provided herein.
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4. Compensation and Benefits.
a. Pre-End Date. For the period April 1, 2003, through September 30,
2003, or until Groetzinger voluntarily resigns or is terminated for
cause prior to September 30, 2003, the Company will pay Groetzinger
as compensation for his services:
i. Annual Base. An annual base salary of $322,722.48 less payroll
taxes and other withholdings;
ii. Bonus. Groetzinger will be paid a (a.) FY03 bonus if one is paid
generally to Senior Vice-President in enterprise management, and
(b.) the "doubler" if one is paid generally to Senior
Vice-Presidents in enterprise management. In calculating the bonus
and doubler, the individual performance component, if any, will be
calculated at the 100% of the FY03 target bonus for Senior Vice
Presidents (currently these would be Tier 3 Senior Vice Presidents).
The actual pay out to Groetzinger will be less payroll taxes and
other withholdings;
iii. Options. As of March 3, 2003, Groetzinger received a grant of
10,000 options for Class A stock. If a grant of stock options is
made generally to Senior Vice Presidents between the date of this
Agreement and September 30, 2003, Groetzinger will be granted such
number as are granted to other Senior Vice Presidents. If the number
of options granted depends in whole or in part on Groetzinger's
performance, he will receive such number of options as are granted
to Senior Vice Presidents who are eligible for 100% of their target
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bonus (currently these would be Tier 3 Senior Vice
Presidents); and
iv. Other Benefits. The other regular benefits
offered to Senior Vice Presidents, including but not
limited to, health, life and disability,
profit-sharing and 40l(k) benefits, 401(k) maximizer
and profit-sharing restoration benefits.
v. Flexible Spending Account. Groetzinger shall be
permitted to use the amounts in his Flexible Spending
Account for CY 2003 for reimbursement of medical
expenses, as permitted by the relevant portions of
the Internal Revenue Code and Regulations and the
Summary Plan Description.
If Groetzinger voluntarily resigns or is terminated "for
cause," as defined herein, between April 1, 2003, and
September 30, 2003, he will no longer receive the compensation
and benefits set forth under subparagraph 4.a. as of the
effective date of such resignation or termination; provided
that prior to such termination "for cause," the Company shall
provide Groetzinger in writing the "for cause" ground(s) and a
reasonable opportunity to cure if the ground is for "gross
incompetence."
Groetzinger will not be deemed to have "voluntarily resigned"
if AG constructively terminates him or he consents to a
written request by AG to cease performing the duties and
obligations of his position prior to October 1, 2003.
b. Post-End Date. If Groetzinger has not voluntarily resigned
or been terminated for cause before October 1, 2003, the
Company will pay Groetzinger and ensure that he will
participate in the following:
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i. Salary Continuation. From October 1, 2003, through
March 31, 2006, AG will pay Groetzinger a total of
$806,806.20, payable in equal monthly installments of
$26,893.54 by the last business day of each calendar
month by direct deposit to an account designated by
Groetzinger;
ii. Health Care. From October 1, 2003, through March
31, 2006, AG agrees Groetzinger will qualify as an
active employee for purposes of receiving the health
care benefits benefits provided for in this
subparagraph. During this period, AG will make
available to Groetzinger, his wife and family, health
care benefit alternatives comparable to those made
available by AG to active associates at AG's
Cleveland headquarters. For this coverage,
Groetzinger will pay the full rate that would be paid
by a pre-age 65 retiree who has Groetzinger's years
of service including the period from October 1, 2003,
through the then-current date of coverage, and
Groetzinger's actual age, for the health care
coverage chosen by Groetzinger. AG will pay to
Groetzinger in advance this same amount, less the
amount that an actively employed associate would pay
for this same coverage, grossed up by 40% to cover
applicable taxes. These obligations by both parties
will be made as adjustments to the amounts AG is to
pay Groetzinger hereunder. If these obligations
cannot be satisfied by such payments, Groetzinger
shall promptly pay AG the balance due. Following
March 31, 2006, Groetzinger, his wife and family will
be eligible to participate in a.) AG's health care
plans, if any, for pre-age 65 AG retirees with
Groetzinger's years of service (with such service to
include the period of October 1, 2003, through March
31, 2006), and Groetzinger's
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actual age, by paying the full amount for such
coverage and b.) upon Groetzinger attaining age 65,
AG's health care plans for AG retirees who are age 65
and older and who have Groetzinger's years of service
(with such service to include the period of October
1, 2003, through March 31, 2006);
iii. Other Plans. From October 1, 2003, through March
31, 2006, AG will allow Groetzinger to participate in
umbrella and life insurance coverages afforded Senior
Vice Presidents, including but not limited to, the
current basic and executive life coverages, if and to
the extent that any is available to Senior Vice
Presidents generally, with AG paying the full cost of
such coverages; and
iv. Car. From October 1, 2003, until March 31, 2006,
Groetzinger will be entitled to use his existing
company car. During this time, AG will make all lease
payments, insure the car and make material repairs,
and Groetzinger will pay for all gas and other
routine maintenance. On or before March 31, 2006,
Groetzinger may purchase the car from AG, free and
clear of all liens and encumbrances, upon payment of
the lower of the then-current net wholesale market
value of the car or lease buy out cost, in either
case less a $500 discount.
v. Stock Options Vesting and Exercisability. All
options in Company stock granted prior to and on
September 30, 2003, shall vest on September 30, 2003,
if they have not already vested by September 30,
2003. All such vested options shall be exercisable
until June 30, 2006 (i.e. the end of salary
continuation plus three months).
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vi. Profit-Sharing and Deferred Compensation Plans.
Following September 30, 2003, AG shall pay
Groetzinger all amounts in Groetzinger's name or
attributable to him in the Employee Retirement and
Profit-Sharing Plan, 401(k) Plan and Executive
Deferred Compensation and "Option It" Plans and their
successor plans, if any, in accordance with the terms
of the plans. AG may not withhold any payment, except
as required by law.
c. Outplacement. From April 1, 2003, until March 31, 2004, and
for additional six month increments thereafter until a.) March
31, 2006, or b.) such shorter period as is required for
Groetzinger to find other full-time employment that he deems
suitable in his discretion, AG will provide professional third
party outplacement services to Groetzinger at its expense;
provided that Groetzinger shall not be required to make an
election every six months for such outplacement benefits to
continue.
If between October 1, 2003, and March 31, 2006, Groetzinger
has materially breached the provisions in paragraphs 5. and/or
6. below, the payments and benefits set forth in paragraph
4.b.i. to 4.b.v. and 4.c. shall cease and any such future
payments and benefits thereunder shall be forfeited. For there
to be a material breach by Groetzinger under any provision of
this Agreement, there must a final decision rendered adverse
to Groetzinger under the dispute resolution procedure set
forth in subparagraph 11.d. to the effect that Groetzinger has
materially breached the Agreement.
The compensation and benefits set forth above in subparagraphs
4.b.i.-vi and 4.c. constitute the complete list of
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post-End Date compensation and benefits due, payable and
available to Groetzinger.
d. For Cause. "For cause" as used in this Agreement is defined
as termination as a result of 1.) Groetzinger's personal
dishonesty, gross incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, material and willful
violation of any law, final cease-and-desist order, rule,
regulation or AG policy, in each case materially affecting AG,
or 2.) Groetzinger's material breach of this Agreement.
5. Confidential and Trade Secret Information. Groetzinger
acknowledges that in the course of his employment with AG, he has and
will have access to confidential information and trade secrets, oral or
written ("Confidential Information"), misuse or disclosure of which
could adversely affect AG's business. Groetzinger agrees that he will
not, either during his employment with AG or at any time thereafter,
use for himself or others, or disclose or convey to others (except as
is necessary in the ordinary course of his employment) any of AG's
Confidential Information. This paragraph shall not prohibit disclosure
of information, which has become public, unless it became public
through Groetzinger's material breach of this Agreement.
6. Non-Competition; Non-Disparagement. In consideration of
AG's agreement to employ Groetzinger under the terms of this Agreement,
Groetzinger agrees that he will not for the following periods engage
anywhere in the United States or Canada, directly or indirectly, in any
business activities, either as principal, agent or consultant or
through any corporation, firm or organization in which he may be an
officer, director, employee, substantial shareholder, partner, member
or be otherwise affiliated that are in competition with AG's businesses
at such time: (i) for the period of his active employment from April 8,
2003, until
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September 30, 2003, and (ii) during the period he may exercise stock
options under paragraph 4.b.v. above.
Further, Groetzinger agrees that at no time following his
signing of this Agreement will he directly or indirectly disparage to a
third party AG, its affiliates and subsidiaries or any of AG's
directors, officers, employees, agents and representatives.
7. Conflict of Interest. Groetzinger represents and warrants
that he has no interest or obligation that is inconsistent with or in
conflict with this Agreement or that would prevent, limit or impair his
performance of any part of this Agreement.
8. Non-disclosure. Unless required by law or agreed to in
writing by the other party, neither party hereto will disclose the
terms of this Agreement or discussions that occurred during its
negotiation to any person, firm or corporation other than its/his
outside advisors who shall be under the same non-disclosure duty.
9. Mutual General Release. In consideration of the mutual
promises made herein and other valuable consideration, from March 1,
1988, to the date of this Agreement, each party hereto hereby releases,
discharges, and forever holds the other harmless from any and all
claims, demands or suits, known or unknown, fixed or contingent,
liquidated or unliquidated, arising out of or related to AG's
employment of Groetzinger,
10. Miscellaneous.
a. Entire Agreement; Modifications. This Agreement constitutes
the entire understanding between Groetzinger and AG relating
to the subject matter contained herein and effective April 8,
2003, this Agreement supersedes any previous oral or written
agreement(s) and understandings,
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including without limitation, the employment agreement, dated
April 25, 1988, between AG and Groetzinger. This Agreement may
not be changed, modified, or altered without the express
written consent of Groetzinger and AG.
b. No Waiver. Either party's failure to insist upon strict
adherence to any term of this Agreement on any occasion shall
not be considered a waiver or deprive either party of its/his
rights to insist thereafter upon strict adherence to that term
or any other term of this Agreement.
c. Severability. If any part or section of this Agreement is
found to be contrary to law or unenforceable, the remainder
shall remain in force and effect.
d. Governing Law; Disputes. This Agreement will be governed by
and construed in accordance with the law of the State of Ohio.
Any disputes regarding this Agreement that cannot be resolved
amicably shall be resolved through AG's "Solutions"
alternative dispute resolution program or its successor, if
any, in accordance with its provisions as are in effect on
April 1, 2003. If such dispute cannot be resolved through
mediation under that program, it shall be resolved by binding
arbitration in Cleveland in accordance with the applicable
rules of the American Arbitration Association.
e. Return of AG Property. Upon Groetzinger's retirement or
termination, regardless of the reason, Groetzinger will
promptly surrender to AG such AG property, except for his
company car, as AG may request in writing that is in
Groetzinger's possession including, but not limited to, all
correspondence, memoranda, notes, records, reports, plans,
computer printouts, reproductions, slides, electronic data,
and any other papers or items, and copies thereof, received or
made by Groetzinger in connection with his employment
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with AG; provided Groetzinger may retain personal matter such
as his datebooks and chronology files.
11. Review by Advisors. Groetzinger acknowledges that he has
had ample opportunity to consult with his legal and financial advisors,
has carefully considered this Agreement, and fully understands its
provisions. He has not relied on any other representations or
statements, written or oral.
12. Survival. The following paragraphs shall survive the
expiration or termination of this Agreement: subparagraphs 4.b., 4.c.,
4.d. and paragraphs 5, 6, 7, 8, 9, 10 and 12.
AMERICAN GREETINGS JON GROETZINGER, Jr.
CORPORATION
BY: /s/ Zev Weiss /s/ Jon Groetzinger Jr
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NAME: Zev Weiss
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TITLE: Exec VP
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