AMTD » Topics » Employment and Severance Agreements

This excerpt taken from the AMTD DEF 14A filed Jan 25, 2007.
Employment and Severance Agreements
 
The Company currently has employment agreements with each of its Named Executive Officers.
 
Joseph H. Moglia, Chief Executive Officer
 
Term of Agreement.  The agreement has an initial term of three years (“Initial Term”). The agreement provides that the Initial Term will be automatically extended for an additional two-year period (“Additional Term”) unless either party provides written notice of non-renewal at least sixty days prior to the commencement of the Additional Term. The agreement may be terminated by either party with or without cause.
 
Salary.  Mr. Moglia’s base salary is $1,000,000 per year (“Base Salary”).
 
Annual Incentive.  Mr. Moglia is eligible to receive an annual cash incentive award (“Annual Incentive”) for achievement of performance criteria established by the Board of Directors for each fiscal year during the term of his employment. Each Annual Incentive will have a target value of $3,000,000.
 
Long-Term Incentive Plan.  The agreement provides that Mr. Moglia is eligible to participate in the Company’s 1996 Long-Term Incentive Plan. On March 10, 2006, Mr. Moglia received a special award under the LTIP of 580,550 performance restricted share units (the “Special Grant”), based on achieving 120% of target performance. The Special Grant will vest and be settled in accordance with the performance criteria and vesting schedule set forth in the award agreement.
 
During each full fiscal year during the term of his employment, Mr. Moglia is eligible to receive an award of performance restricted share units with a target value determined by the Company, equal to $6,000,000 on the date of the grant (“Annual Award”). The Annual Award will vest and be settled in accordance with the performance criteria and vesting schedule provided in the applicable award agreement.
 
Private Aircraft.  The agreement provides that when traveling on Company-related business Mr. Moglia will be entitled to fly on private aircraft at the sole expense of the Company.
 
For a summary of the terms of Mr. Moglia’s employment agreement applicable in the event of his termination or resignation of employment, see the “Report of the H.R. and Compensation Committee on Executive Compensation” later in this section.
 
Employment Agreements of John R. MacDonald, Asiff S. Hirji and T. Christian Armstrong
 
Mr. MacDonald serves as the Company’s Executive Vice President, Chief Operating Officer. Mr. Hirji serves as the Company’s President, Client Group. Mr. Armstrong serves as the Company’s Executive Vice President, Chief Strategy Officer (each referred to as the “Executive”). Except as noted below, the material terms of each employment agreement are identical (the employment agreement of each Executive is referred to as the “Executive Agreement”).
 
Salary.  The Executive Agreement provides that the Executive’s base salary is $400,000 per year (“Executive Base Salary”).
 
Annual Incentive.  The Executive Agreement provides that the Executive is eligible to receive an annual cash incentive award (“Executive Annual Incentive”) for achievement of performance criteria established by the Board of Directors. Each Executive Annual Incentive will have a target value of $960,000.
 
Long Term Incentive Plan.  The Executive Agreement provides that the Executive is eligible to participate in the LTIP. On March 10, 2006, the Executive received a special award under the LTIP of 116,109 performance restricted share units (the “Executive Special Grant”), based on achieving 120% of target performance. The Executive Special Grant will vest and be settled in accordance with the performance criteria and vesting schedule set forth in the applicable award agreement.


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During each full fiscal year during the term of their employment, the Executive is eligible to receive an award of performance restricted share units with a target value determined by the Company, equal to $640,000 on the date of the grant (“Executive Annual Award”), and will vest and be settled in accordance with the performance criteria and vesting schedule provide in the applicable award agreement.
 
Excise Tax on Excess Parachute Payments (280G).  The Executive Agreement provides that in the event that the severance and other benefits provided under the Executive Agreement constitute excess parachute payments under Section 280G of the Internal Revenue Code of 1986, as amended, (the “Code”), and such severance payments and other benefits would be subject to an excise tax under Section 4999 of the Code, then the Executive’s severance benefits payable under the terms of the Executive Agreement will be either (i) delivered in full or (ii) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to the excise tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax, results in the receipt by the Executive on an after-tax basis, of the greatest amount of severance benefits.
 
For a summary of the terms of the employment agreements of Messrs. MacDonald, Hirji and Armstrong applicable in the event of their termination or resignation of employment, see the “Report of the H.R. and Compensation Committee on Executive Compensation” later in this section.
 
John R. MacDonald, Executive Vice President, Chief Operating Officer
 
Term of Agreement.  The Executive Agreement of Mr. MacDonald has an initial term of five years (“MacDonald Initial Term”). The Executive Agreement of Mr. MacDonald provides that the MacDonald Initial Term will be automatically extended for an additional one-year term (the “MacDonald Additional Term”) unless either party provides written notice of non-renewal at least sixty days prior to the date of automatic renewal. Following the MacDonald Additional Term, the Agreement will renew for an additional one-year term upon the mutual consent of Mr. MacDonald and the Company. The Executive Agreement of Mr. MacDonald may be terminated by either party with or without cause.
 
Asiff S. Hirji, President, Client Group
 
Term of Agreement.  The Executive Agreement of Mr. Hirji has an initial term of five years (“Hirji Initial Term”). The Executive Agreement of Mr. Hirji provides that the Hirji Initial Term will be automatically extended for an additional one-year term (the “Hirji Additional Term”) unless either party provides written notice of non-renewal at least sixty days prior to the date of automatic renewal. Following the Hirji Additional Term, the Executive Agreement of Mr. Hirji will renew for an additional one-year term upon the mutual consent of Mr. Hirji and the Company. The Executive Agreement of Mr. Hirji may be terminated by either party with or without cause.
 
  T. Christian Armstrong, Executive Vice President, Chief Strategy Officer
 
Term of Agreement.  The Executive Agreement of Mr. Armstrong has an initial term of three years (“Armstrong Initial Term”). The Executive Agreement of Mr. Armstrong provides that the Armstrong Initial Term will be automatically extended for an additional two-year term unless either party provides written notice of non-renewal at least sixty days prior to the date of automatic renewal. The Executive Agreement of Mr. Armstrong may be terminated by either party with or without cause.
 
  J. Joe Ricketts, Chairman and Founder
 
Mr. Ricketts’ employment agreement was entered into as of October 1, 2001 and amended on August 5, 2004. It has a seven-year term, ending on September 30, 2008. Either party may terminate the agreement with or without cause. The agreement provides for the payment of a base salary of not less than $650,000 per year. For fiscal years 2007 and 2008, the Company has the discretion to determine the annual cash bonus and annual stock-based award targets and target levels for Mr. Ricketts, but in determining his annual cash bonus and annual stock-based award, the Company must treat Mr. Ricketts reasonably, equitably and comparably to the Company’s other executive officers. The agreement also provides for employee assistance program payments and tax payments, fully equipped


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home offices, participation in employee benefits plans and programs maintained by the Company, and reimbursement for reasonable fees and expenses for legal, tax, accounting, financial and estate planning counseling and services and some insurance coverage.
 
If the agreement is terminated due to Mr. Ricketts’ disability, Mr. Ricketts is entitled to payment of 50 percent of his base salary plus benefits until the earlier of the end of the agreement term or the fifth anniversary of the date of the disability. If Mr. Ricketts is discharged from employment by the Company without cause or terminates his employment following specified breaches of the agreement by the Company, he will be entitled to receive payments of his base salary, bonus, option awards and continuing benefits for the remainder of the agreement term; provided, that in no event will his payments under these circumstances be less than the sum of three times (1) his base salary, determined as of October 1, 2001, and (2) the greater of his annual cash bonus payable for 2002 or 2003. If a termination described in the preceding sentence occurs, Mr. Ricketts will also be entitled to recover damages he incurs as a result of his inability to exercise his outstanding stock options. The agreement contains covenants by Mr. Ricketts not to compete with the Company during the term of the agreement and for a specified period after the term.
 
Mr. Ricketts and the Company entered into an amendment to the employment agreement dated August 5, 2004. Under the amendment, Mr. Ricketts was granted a stock option award for fiscal year 2003 with respect to 750,000 shares of Company common stock. Mr. Ricketts was not entitled to receive further annual stock-based awards until the Company reinstated its annual stock-based award program in fiscal year 2006. However, if Mr. Ricketts is discharged from employment by the Company without cause or terminates his employment following specified breaches of the agreement by the Company, his annual stock-based award will be in the amount of options to purchase 390,000 shares of Company common stock.
 
Employment and Severance Agreements

      The Company currently has employment agreements with each of its Named Executive Officers.

      Joseph H. Moglia. Mr. Moglia’s employment agreement was entered into as of March 1, 2001 and had a two-year initial term. The agreement was renewed for an additional two-year term on March 1, 2003. On December 15, 2004, the Company and Mr. Moglia agreed to amend and restate Mr. Moglia’s employment agreement. As amended, Mr. Moglia’s employment agreement will be extended through September 30, 2005 at the same salary and annual bonus target. Either party may terminate the employment agreement with or without cause. Pursuant to the original agreement, Mr. Moglia was paid a signing bonus of $1.3 million and was reimbursed for relocation costs. The original agreement provided for the payment of a base salary of $600,000 per year, a one-time benefit of $15.6 million pursuant to a deferred compensation plan that vested as of March  1, 2003 and is payable upon his termination, and participation in other employee benefits under the various benefit plans and programs maintained by the Company. The original agreement was amended in 2002 to provide Mr. Moglia an annual bonus with a target of $625,000. In addition, the original agreement provided that, if Mr. Moglia were still employed by the Company as of March 1, 2003, he would be awarded stock options with respect to 2 percent of the then outstanding shares of Company Common Stock. If Mr. Moglia is discharged from employment by the Company without cause or terminates his employment under circumstances that constitute constructive dismissal, all of his stock options will vest. Under the deferred compensation plan established in connection with the original agreement, Mr. Moglia is entitled to a deferred payment of cash compensation, as adjusted for earnings and losses based on investment performance. The balance in the deferred compensation account vested pro rata on a daily basis over the initial two-year term. Payments of the deferred compensation account balance shall begin as soon as practicable after Mr. Moglia’s termination date and may be made in a lump sum or installments over a period of not more than 10 years, as elected by Mr. Moglia in accordance with the plan. If Mr. Moglia dies before the vested balance in his deferred compensation account is paid to him, the vested balance will be paid in a lump sum to a beneficiary named by him. Pursuant to the December 15, 2004 agreement, Mr. Moglia will be entitled to fly on private aircraft when traveling on Company-related business. Mr. Moglia will establish a budget for private air travel which is subject to the approval by the Company’s Board of Directors and which will not exceed $200,000 for the remainder of the employment term as extended.

      The original agreement provides that, if a change in control of the Company occurs, Mr. Moglia’s employment will automatically terminate and he will be entitled to the payments and benefits to which he would otherwise be entitled under the agreement had he continued in employment with the Company through both the initial and additional two-year terms. Pursuant to the December 15, 2004 agreement, Mr. Moglia has agreed not to compete with the Company from the end of the term of his employment through September 30, 2006. He will be entitled to receive noncompetition payments during the period in which the agreement not to compete is in effect equal to the payments (salary, bonus and health and disability insurance) he currently receives under his employment agreement.

      Following Mr. Moglia’s retirement at the end of the term of his amended employment agreement, Mr. Moglia would be given the title of CEO Emeritus of the Company. He will be entitled to retain this title for no more than five years, subject to earlier termination upon his death, his commencement of other employment, or his engaging in specified conduct that would permit termination for cause under his existing employment agreement. Mr. Moglia would be required to relinquish his title of CEO Emeritus of the Company upon the approval of a majority of the Company’s Board of Directors following the recommendation of the then Company Chief Executive Officer. As CEO Emeritus of the Company, Mr. Moglia would be expected to perform the duties consistent with those of a CEO Emeritus of a public company as requested from time to time by the Company’s Board of Directors. While CEO Emeritus of the Company, Mr. Moglia would be entitled to the following benefits: (a) an office at the Company’s headquarters, subject to relocation at the Company’s or Mr. Moglia’s request to a location in the continental United States of Mr. Moglia’s choice, the cost of such office shall not substantially exceed the cost of providing Mr. Moglia an office in Omaha at September 30, 2005; (b) an assistant at his office location, the cost of such assistant not to substantially exceed the cost of providing Mr. Moglia an assistant in Omaha at September 30, 2005; and (c) the ability to utilize private air travel when traveling at the Company’s request on Company’s business,

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subject to the same terms as apply to private air travel at September 30, 2005. If Mr. Moglia’s status as CEO Emeritus of the Company is terminated by the Company’s Board of Directors, Mr. Moglia would be entitled to continue to receive the benefits described in (a) and (b) in the preceding sentence for a period equal to the lesser of 24 months after he relinquishes the title of CEO Emeritus of the Company or the remainder of the CEO Emeritus term.

      Under an agreement between the Company and Mr. Moglia, dated September 13, 2001, the Company agreed to lend Mr. Moglia the Medicare tax amounts due from time to time resulting from his vesting in benefits under the deferred compensation plan. Mr. Moglia is required to repay the loan, which does not bear interest, at the time of termination of his employment. The Company may set off the amount of the loan against the amount that would otherwise be payable to Mr. Moglia under the deferred compensation plan. For periods prior to the termination of his employment, the Company will reimburse Mr. Moglia annually for all taxes imposed on the interest imputed to Mr. Moglia.

      J. Joe Ricketts, Chairman and Founder. Mr. Ricketts’ employment agreement was entered into as of October 1, 2001 and has a seven-year term. Either party may terminate the agreement with or without cause. The agreement provides for the payment of a base salary of not less than $650,000 per year, an annual bonus with a target level for each of fiscal years 2002 and 2003 of not less than 75% of his base salary, grants of stock options pursuant to the Company’s long term incentive plan with a target award value for each of fiscal years 2002 and 2003 of not less than $1,200,000, employee assistance program payments and tax payments, fully equipped home offices, participation in employee benefits plans and programs maintained by the Company, and reimbursement for reasonable fees and expenses for legal, tax, accounting, financial and estate planning counseling and services and some insurance coverages. If the agreement is terminated due to Mr. Ricketts’ disability, Mr. Ricketts is entitled to payment of 50% of his base salary plus benefits until the earlier of the end of the agreement term or the fifth anniversary of the date of the disability. If Mr. Ricketts is discharged from employment by the Company without cause or terminates his employment following specified breaches of the agreement by the Company, he will be entitled to receive payments of his base salary, bonus, option awards and continuing benefits for the remainder of the agreement term; provided, that in no event will his payments under these circumstances be less than the sum of three times (1) his base salary, determined as of October 1, 2001, and (2) his annual cash bonus payable for 2002. If a termination described in the preceding sentence occurs, Mr. Ricketts will also be entitled to recover damages he incurs as a result of his inability to exercise his outstanding stock options. The agreement contains covenants by Mr. Ricketts not to compete with the Company during the term of the agreement and for a specified period after the term. Mr. Ricketts and the Company entered into an amendment to the employment agreement dated August 5, 2004. Under the amendment, Mr. Ricketts was granted a stock option award for fiscal year 2003 with respect to 750,000 shares of Company Common Stock. Mr. Ricketts will not be entitled to annual stock option awards for fiscal years after 2003 until the Company reinstates its annual stock option award program that existed on October 1, 2001 or implements a new program that provides, after fiscal year 2003, equity-based incentive compensation to at least one of the other executive officers of the Company; however, if Mr. Ricketts is discharged from employment by the Company without cause or terminates his employment following specified breaches of the agreement by the Company, his annual stock option award will be in the amount of options to purchase 390,000 shares of Company Common Stock. Subsequent to fiscal year 2003 the Company will have the discretion to determine the annual cash bonus and annual stock option award targets and target levels for Mr. Ricketts; however, in determining his annual cash bonus and annual stock option award, the Company must treat Mr. Ricketts reasonably, equitably and comparably to the Company’s other executive officers.

      John R. MacDonald, Executive Vice President, Chief Financial Officer and Treasurer. Mr. MacDonald’s employment agreement was entered into as of September 9, 2002 and has a three-year term. The agreement provides for the payment of a base salary of $350,000, an annual bonus target of 100% of his base salary, grants of stock options pursuant to the Company’s long-term incentive plan, benefits pursuant to a deferred compensation plan and participation in other employee benefits under the various benefit plans and programs maintained by the Company. The agreement provides that it may be terminated by either party at any time and that if Mr. MacDonald is terminated by the Company for any reason other than cause or if he terminates his employment for good reason, he will be entitled to receive continued payments of his base

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salary for a period of one year after termination or until the end of the term of the agreement, whichever is longer. Mr. MacDonald will also receive the amount of annual target bonus to which he was entitled for the year in which the termination occurs and he will be provided with continuing medical coverage, subject to limitations, for the severance period at the Company’s cost. If, following a change in control, Mr. MacDonald’s employment is terminated by the Company without cause or his employment is terminated for good reason, he will be entitled to be paid a lump sum equal to his salary and bonus as described above. The agreement contains covenants by Mr. MacDonald not to compete with the Company during the term of employment and for a specified period after the term. All severance benefits payable under the agreement are conditional on Mr. MacDonald’s execution of a release of claims and, if any payments under the agreement would subject Mr. MacDonald to an excise tax on parachute payments, the payments under the agreement will be reduced to the extent necessary to avoid the tax.

      J. Peter Ricketts, Executive Vice President, Chief Operating Officer. Mr. Ricketts’ employment agreement was entered into as of September 9, 2002 and has a three-year term with provisions for renewal for an additional twelve months. The agreement provides for the payment of an annual base salary of at least $300,000, an annual bonus with a target of 100% of his base salary, grants of stock options pursuant to the Company’s long-term incentive plan, benefits pursuant to a deferred compensation plan and participation in other employee benefits under the various benefit plans and programs maintained by the Company. The agreement provides that it may be terminated by either party at any time. If Mr. Ricketts is terminated by the Company for any reason other than cause or if he terminates his employment for good reason, Mr. Ricketts is entitled to receive continued payments of his base salary for a period of one year after termination or until the end of the term of the agreement, whichever is longer. Mr. Ricketts will also receive the amount of annual target bonus to which he was entitled for the year in which the termination occurs and he will be provided with continuing medical coverage, subject to limitations, for the severance period at the Company’s cost. If, following a change in control, Mr. Ricketts’ employment is terminated by the Company without cause or his employment is terminated for good reason, he is entitled to be paid a lump sum equal to his salary and bonus as described above. The agreement contains covenants by Mr. Ricketts not to compete with the Company during the term of employment and for a specified period after the term. All severance benefits payable under the agreement are conditional on Mr. Ricketts’ execution of a release of claims and, if any payments under the agreement would subject Mr. Ricketts to an excise tax on parachute payments, the payments under the agreement will be reduced to the extent necessary to avoid the tax.

      Michael R. Feigeles, Executive Vice President. Mr. Feigeles’ employment agreement was entered into as of February 28, 2003 and has a two-year term. The agreement provides for the payment of a base salary of $350,000, an annual bonus with a target of 100% of his base salary, grants of stock options pursuant to the Company’s long-term incentive plan, benefits pursuant to a deferred compensation plan and participation in other employee benefits under the various benefit plans and programs maintained by the Company. The agreement provides that it may be terminated by either party at any time. If Mr. Feigeles is terminated by the Company for any reason other than cause or if he terminates his employment for good reason, Mr. Feigeles is entitled to receive continued payments of his base salary for a period of one year after termination or until the end of the term of the agreement, whichever is longer. Mr. Feigeles will also receive the amount of annual target bonus to which he was entitled for the year in which the termination occurs and he will be provided with continuing medical coverage, subject to limitations, for the severance period at the Company’s cost. If, following a change in control, Mr. Feigeles’ employment is terminated by the Company without cause or his employment is terminated for good reason, he is entitled to be paid a lump sum equal to his salary and bonus as described above. The agreement contains covenants by Mr. Feigeles not to compete with the Company during the term of employment and for a specified period after the term. All severance benefits payable under the agreement are conditional on Mr. Feigeles’ execution of a release of claims and, if any payments under the agreement would subject Mr. Feigeles to an excise tax on parachute payments, the payments under the agreement will be reduced to the extent necessary to avoid the tax.

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      Asiff S. Hirji, Executive Vice President, Chief Information Officer. Mr. Hirji’s employment agreement was entered into as of April 7, 2003 and has a three-year term. The agreement provides for the payment of a base salary of $350,000, an annual bonus with a target of 100% of his base salary, grants of stock options pursuant to the Company’s long-term incentive plan, benefits pursuant to a deferred compensation plan and participation in other employee benefits under the various benefit plans and programs maintained by the Company. The agreement provides that it may be terminated by either party at any time. If Mr. Hirji is terminated by the Company for any reason other than cause or if he terminates his employment for good reason, Mr. Hirji is entitled to receive continued payments of his base salary for a period of one year after termination or until the end of the term of the agreement, whichever is longer. Mr. Hirji will also receive the amount of annual target bonus to which he was entitled for the year in which the termination occurs and he will be provided with continuing medical coverage, subject to limitations, for the severance period at the Company’s cost. If, following a change in control, Mr. Hirji’s employment is terminated by the Company without cause or his employment is terminated for good reason, he is entitled to be paid a lump sum equal to his salary and bonus as described above. The agreement contains covenants by Mr. Hirji not to compete with the Company during the term of employment and for a specified period after the term. All severance benefits payable under the agreement are conditional on Mr. Hirji’s execution of a release of claims and, if any payments under the agreement would subject Mr. Hirji to an excise tax on parachute payments, the payments under the agreement will be reduced to the extent necessary to avoid the tax.

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