Amended and Extended Employment Agreement - July 1, 2002

First Amendment - July 28, 2003

Second Amendment - August 20, 2004

Third Amendment - January 21, 2005

 

 

Henry R. Silverman

 

                    AMENDED AND EXTENDED EMPLOYMENT AGREEMENT

 

 

         This Amended and Extended Employment Agreement ("Agreement") dated as

of July 1, 2002 (the "Effective Date"), by and between Cendant Corporation, a

Delaware corporation (the "Company"), and Henry R. Silverman (the "Executive").

 

         WHEREAS, the Executive has served as the Chairman of the Board and

Chief Executive Officer and President of the Company or its predecessors and

currently serves as such pursuant to an employment agreement that has been

amended over the years to reflect the growth of the Company and the Executive's

expanded responsibilities and duties (the "Prior Agreement"):

 

         WHEREAS, the Board of Directors of the Company (the "Board") recognizes

that the Executive's contribution to the growth and success of the Company has

been substantial and that the size and scope of the Company's operations have

expanded significantly in recent years requiring increased executive management

oversight and additional responsibilities for the Executive; and

 

         WHEREAS, the Board and the Executive desire to further amend and

restate the Executive's employment agreement to extend the term of employment of

the Executive and to provide the Executive with employment arrangements with the

Company in the best interests of the Company and its stockholders and the

Executive is willing to commit himself to serve the Company on the terms and

conditions herein provided, which terms and conditions shall be considered for

all purposes an extension of the Executive's Prior Agreement.

 

 

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         NOW THEREFORE, in consideration of the foregoing and other good and

valuable consideration, the receipt and sufficiency of which are hereby

acknowledged, the parties hereby agree to the terms and conditions set forth

below.

 

         1. TERM OF EMPLOYMENT. The employment of the Executive by the Company

pursuant to this Agreement shall begin as of the Effective Date and shall end on

December 31, 2012, subject to earlier termination as provided herein (the

"Expiration Date") (such period from the Effective Date to the Expiration Date,

the "Term").

 

         2. POSITION AND DUTIES. During the Term the Executive shall serve as

Chairman of the Board and Chairman of the Executive Committee and President and

Chief Executive Officer of the Company and shall report solely and directly to

the Board. During the Term, the Executive shall at all times be the senior-most

officer of the Company, with the duties, responsibilities and authority

commensurate with chief executive officers of public entities of similar size,

and in any case consistent with such duties, responsibilities and authority as

have heretofore been his as Chairman and CEO. The Executive shall devote such

time and effort as may be necessary and appropriate from time to time in the

circumstances for the proper discharge of his duties and obligations under the

Agreement.

 

         3. PLACE OF PERFORMANCE. In connection with the Executive's employment,

the Company shall continue to provide him with an office, office furniture and

office staff of his selection in midtown Manhattan of the New York City

metropolitan area at the same level as currently provided for, which office

shall continue to be his base of operations, except to the extent that the

Executive may, at his election, render his services from other locations, and

except for required travel on the Company's business. The Company shall pay all

the

 

 

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Executive's reasonable business expenses which relate to the Company at such

Manhattan location.

 

         4. COMPENSATION AND RELATED MATTERS. (a) SALARY. During the Term, the

Company shall pay the Executive an annual base salary at a rate of $3,300,000

per year, such salary to be paid in substantially equal semi-monthly or

bi-weekly installments. Such annual salary shall be increased on each January 1,

commencing January 1, 2003, during the Term (an "Adjustment Date") as follows:

if the "Consumer Price Index" for the calendar month immediately preceding the

applicable Adjustment Date shall exceed the Consumer Price Index for the

corresponding month during the prior year, then such salary (as previously

adjusted) shall be determined by multiplying the amount of such salary (as

previously adjusted) by a fraction, the numerator of which shall be the Consumer

Price Index for the calendar month immediately preceding the applicable

Adjustment Date, and the denominator of which shall be the Consumer Price Index

for the applicable month during the prior year. Each adjustment shall be made as

promptly as practicable after publication of the Consumer Price Index for the

month immediately preceding the applicable Adjustment Date. Immediately after

such publication, the Company shall pay to the Executive such additional amount

as shall be required to bring the aggregate of the semimonthly installments of

the then current annual salary paid to the Executive on and after the applicable

Adjustment Date up to the total dollar amount required by reason of such

adjustment; thereafter, all monthly installments of the adjusted annual salary

for the balance of the 12 months shall be made at the newly adjusted rate. In no

event shall such annual salary (as previously adjusted) be decreased to reflect

a decline in the Consumer Price Index. As used in this Agreement, "Consumer

Price Index" shall mean the Consumer Price Index, Urban Wage Earners and

Clerical Workers, Northeast Urban Size A, published by the Bureau of Labor

Statistics of

 

 

 

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the United States Department of Labor. The applicable number in such Index, for

purposes of this Agreement, shall be the number for "All Items" (which number

for the month of March 2002 was 183.6). In the event a substantial change is

made with respect to the information used to determine the Consumer Price Index,

or in the event another publication is used because the Consumer Price Index is

not published, appropriate adjustment shall be made in the corresponding numbers

for prior periods so that after such adjustment the same result will be produced

as would have resulted had there been no such change in the Consumer Price Index

or had it continued to be published. Notwithstanding the foregoing, the Board

may, during the Term, increase (but not decrease) the Executive's annual base

salary from what would otherwise be payable hereunder.

 

         (b) EXPENSES. During the Term, the Executive shall be entitled to

receive prompt reimbursement for all reasonable and customary expenses incurred

by him in performing services hereunder, including first-class travel

accommodations (air and lodging) for business-related travel and living expenses

while away from home on business or at the request of and in the service of the

Company; provided, that such expenses are incurred and accounted for in

accordance with the policies and procedures established by the Company and

approved by the Board. The Company shall provide the Executive with a car and

driver. So long as the Company is in the car rental or car leasing business, the

Company shall also continue to arrange to provide the Executive, in a manner

consistent with past practice prior to the execution of this Agreement, access

to and the use of "demonstration" and/or other vehicles used for product testing

and evaluation at the Executive's request.

 

         (c) OTHER BENEFITS. The Executive shall be entitled to participate in

or receive benefits under any employee benefit plan, arrangement or perquisite

made available by the

 

 

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Company now or in the future to its senior- most management and key management

employees, and nothing paid to the Executive under any plan, arrangement or

perquisite presently in effect or made available in the future shall be deemed

to be in lieu of the salary and other compensation payable to the Executive

pursuant to this Section 4. Any payments or benefits payable to the Executive

hereunder in respect of any year during which the Executive is employed by the

Company for less than the entire such year shall, unless otherwise provided in

the applicable plan or arrangement, be prorated in accordance with the number of

days in such year during which he is so employed. Without limiting the

generality of the foregoing, the compensation, benefits and perquisites provided

pursuant to this paragraph (c) shall (i) in no event be less favorable than such

compensation, benefits and perquisites provided to the Company's Chairman of the

Board of Directors (at such times as the Executive is not serving in such

capacity) or the Chief Executive Officer (at all other times during the term of

employment hereunder), (ii) provide the Executive with a level of benefits and

perquisites no less favorable than those that are made available to chief

executive officers of other comparable public companies, (iii) be no less

favorable than the highest level of compensation, benefits and perquisites

provided to the Executive currently under the Prior Agreement, and (iv) include

(A) use of an automobile driver and car service consistent with current practice

as in effect prior to the execution of this Agreement and (B) priority use and

scheduling of the Company aircraft as provided for in Section 4(h) below.

 

         (d) INDEMNIFICATION. In addition to any indemnification provided by the

Certificate of Incorporation or By-Laws of the Company or otherwise (the

indemnification provisions of which shall not be amended in any way to limit or

reduce the level or nature of indemnification available to the Executive as a

Director or officer of the Company during the

 

 

 

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         Term from that in effect immediately prior to the execution of this

Agreement), the Company shall indemnify and provide reasonable advances for

expenses to the Executive, to the fullest extent permitted by the laws of the

State of Delaware, if the Executive is made a party, or threatened to be made a

party, to any threatened, pending or completed action, suit or proceeding,

whether civil, criminal, administrative or investigative, by reason of the fact

that the Executive is or was an officer, director or employee of the Company or

any subsidiary or affiliate thereof, in which capacity the Executive is or was

serving at the Company's request, against expenses (including reasonable

attorneys' fees and expenses), judgments, fines and amounts paid in settlement

incurred by him in connection with such action, suit or proceeding. The Company

shall at no cost to the Executive at all times include the Executive, during the

Term and for so long thereafter as Executive may be subject to any such claim,

as an insured under any directors' and officers' liability insurance policy

maintained by the Company, which policy shall provide such coverage as the Board

may deem appropriate (but in no event less than the coverage as in effect prior

to the execution of this Agreement). Any payments under this provision which are

treated as taxable income to the Executive (in accordance with IRS rules and

regulations) shall be grossed up for tax purposes at the Executive's then

applicable federal, state and local tax rate.

 

         (e) BONUS. (i) In addition to the annual base salary provided for above

in Section 4(a), the Company shall pay to the ----- Executive incentive

compensation in an amount determined as follows (such amount, the "Annual

Formula Bonus"):

 

         (A) FOR FISCAL YEAR 2002 FROM JANUARY 1, 2002 THROUGH TO THE EFFECTIVE

             DATE:

 

         The Company shall pay to the Executive an Annual Formula Bonus in an

         amount equal to seventy-five basis points (0.75%) of the Company's

 

 

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<PAGE>

 

 

         Adjusted EBITDA (as defined below) for Fiscal Year 2002 determined

         through to the Effective Date; PROVIDED, HOWEVER, that such bonus

         payment shall in no event exceed 150% of the pro rated annual base

         salary payable to the Executive through to the Effective Date.

 

         (B) FOR FISCAL YEAR 2002 FROM THE EFFECTIVE DATE THROUGH TO THE END OF

             FISCAL YEAR 2002 AND EACH FISCAL YEAR THEREAFTER

 

         The Company shall pay to the Executive an Annual Formula Bonus for any

         particular fiscal year (or part thereof) during the Term equal to the

         product of (I) sixty basis points (0.60%) multiplied by (II) the

         Company's Adjusted Pre-Tax Income (as defined below) for such fiscal

         year (or part thereof, and in the case of Fiscal Year 2002 Adjusted

         Pre-Tax Income shall be determined from the Effective Date through the

         end of Fiscal Year 2002); PROVIDED, HOWEVER, that such bonus payment

         shall in no event exceed the product of (x) $100,000 multiplied by (y)

         each penny of the Company's Adjusted Diluted Earnings Per Share (as

         defined below) for such fiscal year (or part thereof, and in the case

         of Fiscal Year 2002 Adjusted Diluted Earnings Per Share shall be

         determined from the Effective Date through the end of Fiscal Year

         2002).

 

         (ii)     The aggregate Annual Formula Bonus due the Executive for

                  Fiscal Year 2002 shall be the sum of the Fiscal Year 2002

                  bonus calculations provided for in subclauses (e)(i)(A) and

                  (e)(i)(B) above.

 

         (iii)    For purposes of this Agreement:

 

                  "Adjusted EBITDA" shall mean the Company's earnings before

                  interest, taxes, depreciation and amortization for any

                  applicable fiscal year as

 

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                  reflected on the Company's audited consolidated statements of

                  income, but (A) adjusted for any extraordinary gains or losses

                  or items of a non-recurring nature to the extent such may have

                  otherwise been reflected in the Company's audited financial

                  statements and any acquisition and integration costs arising

                  in connection with or otherwise related to acquisitions or

                  mergers undertaken by the Company and (B) including any

                  budgeted EBITDA for the applicable fiscal year (or part

                  thereof) attributable to any business division, unit or

                  operation that was sold, transferred, spun-off, or otherwise

                  disposed of during such fiscal year; "Adjusted Pre-Tax Income"

                  shall mean the Company's income before taxes for any

                  applicable fiscal year as reflected on the Company's audited

                  consolidated statements of income, as the same may be adjusted

                  by the Company's auditors, and further adjusted for any

                  extraordinary gains or losses or items of a non-recurring

                  nature to the extent such may have otherwise been reflected in

                  the Company's audited financial statements and any acquisition

                  and integration costs arising in connection with or otherwise

                  related to acquisitions or mergers undertaken by the Company;

                  and "Adjusted Diluted Earnings Per Share" shall mean the

                  Company's diluted earnings per share as reflected on the

                  Company's quarterly and/or annual press releases as the same

                  may be adjusted by the Company's auditors, and including

                  adjustments for any extraordinary gains or losses (net of

                  taxes, per diluted share) or items of a non-recurring nature

                  (net of taxes, per diluted share) to the extent such may have

                  otherwise been

 

 

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                  reflected in the Company's audited financial statements and

                  any acquisition and integration costs (net of taxes, per

                  diluted share) arising in connection with or otherwise related

                  to acquisitions or mergers undertaken by the Company to the

                  extent such may have otherwise been reflected in the Company's

                  audited financial statements and/or press releases.

 

 

         (iv)     The Annual Formula Bonus, with respect to any fiscal year of

                  the Company, shall be paid to the Executive no later than

                  ninety (90) days following the end of such fiscal year, or as

                  soon as practicable thereafter if the amount of such Annual

                  Formula Bonus cannot be determined by such date.

                  Notwithstanding the foregoing, a prorated Annual Formula Bonus

                  shall not be paid for a partial year if the Executive's

                  employment is terminated for Cause pursuant to Section

                  6(a)(iii) or by a voluntary resignation pursuant to Section 6

                  (b).

 

         (f) OPTIONS AND RESTRICTED STOCK. During the Term, the Board or the

Compensation Committee of the Board may grant options or restricted stock to the

Executive from time to time on a discretionary basis, on such terms and

conditions as the Board or Committee deems appropriate; provided that to the

extent the terms and conditions of this Agreement conflict with or are otherwise

inconsistent with the terms and conditions of any such stock option, restricted

stock or other equity based award plan (including but not limited to the

provisions regarding accelerated vesting of options or lapsing of restrictions

on restricted stock), the terms and conditions of this Agreement shall govern

and prevail.

 

         (g) LIFE INSURANCE BENEFITS. Subject to the terms and conditions of the

Split-Dollar Agreements dated as of August 23, 2000 by and between the Company

and the Executive and the Limited Collateral Assignments related thereto (the

"Insurance Agreements"), the

 

 

 

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<PAGE>

 

 

Company shall maintain throughout the Term and following the termination or

expiration of the Term for any reason and for the remainder of the Executive's

life, one or more term life insurance policies on the life of the Executive in

the aggregate face amount of $100 million. Any reference to the Executive's

Amended and Restated Employment Agreement set forth in the Insurance Agreements

shall be deemed to mean this Agreement. Nothing contained in this paragraph

shall in any way reduce or alter the Executive's rights under the Insurance

Agreements or reduce or alter the Company's obligations under the Insurance

Agreements, including without limitation the Executive's right to name

beneficiaries of the policies and the Company's obligation to make certain

premium payments in respect of the policies. The Company represents and warrants

that the terms of the Insurance Agreements are in conformance with the

provisions of this Agreement.

 

         (h) USE OF AIRCRAFT. In order to ensure the accessibility and safety of

the Executive during the Term, the Executive shall have priority scheduling on

Company aircraft used for business purposes and Executive shall be entitled to

any other use of Company aircraft in accordance with Company practice. The

Company also shall reimburse Executive for all costs associated with the

Executive's use of aircraft in accordance with the Company's policies, whether

the aircraft is being chartered or is Company-owed. Any payments under this

provision which are to be treated as taxable compensation to the Executive (in

accordance with IRS rules and regulations) shall be grossed up for tax purposes

at the Executive's then applicable federal, state and local tax rate.

 

         (i) REGISTRATION RIGHTS AND RELATED ASSISTANCE. During the Term and for

so long thereafter as the Executive or his estate directly or indirectly own

common stock, stock options or equity-based awards in the Company, (A) the

Company shall file with the Securities

 

 

 

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and Exchange Commission and thereafter maintain the effectiveness of one or more

registration statements registering under the Securities Act of 1933, as amended

(the "1933 Act"), the offer and sale of shares by the Company to Executive

pursuant to stock options or other equity-based awards granted to Executive

under Company plans or otherwise or, if shares are acquired by Executive in a

transaction not involving an offer or sale to Executive but resulting in the

acquired shares being "restricted securities" for purposes of the 1933 Act,

registering the reoffer and resale of such shares by Executive, (B) the

Executive shall have unlimited piggyback registration rights in connection with

any proposed public offering by the Company (subject to any reasonable

allocation requirements and/or restricted selling or blackout periods imposed by

the Company or any applicable regulatory agency), and (C) to the extent the

Executive (or his estate) determines to engage in an exempt sale of any common

stock or other securities of the Company, the Company shall take all reasonable

steps to cooperate with and assist the Executive (or his estate) in connection

with such sale.

 

         5. ADDITIONAL POTENTIAL COMPENSATION. Nothing in this Agreement shall

prohibit the Compensation Committee of the Company's Board of Directors from

awarding additional compensation to the Executive if, in its sole discretion,

the Compensation Committee determines that such a payment is warranted based

upon the Executive's performance.

 

         6. TERMINATION. (a) The Executive's employment pursuant to this

Agreement may be terminated by the Company only under the following

circumstances:

 

         (i)      DEATH. The Executive's employment shall terminate upon his

                  death. If the Executive's employment is terminated pursuant to

                  this paragraph his estate or legal representative shall

                  receive his accrued annual base salary through the date his

                  employment is terminated, an Annual Formula Bonus prorated for

                  the period

 

 

 

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                  ending on the date his employment is terminated and any other

                  earned and accrued, but otherwise unpaid amounts (including,

                  without limitation, any then unpaid Annual Formula Bonus). In

                  addition, the Executive's eligible dependants shall be

                  entitled to continued Health and Welfare Coverage (as defined

                  below) for the remainder of their lives at the prevailing

                  contribution rates applicable to Company employees receiving

                  such Health and Welfare Coverage.

 

         (ii)     DISABILITY. If, in the written opinion of a qualified

                  physician selected by the Company and acceptable to the

                  Executive (or the Executive's legal representative) the

                  Executive shall become permanently and totally unable to

                  perform his duties hereunder due to physical or mental

                  illness, and has failed, because of such illness, to render,

                  for at least six (6) consecutive months, services of the

                  character contemplated by this Agreement, the Company may

                  terminate the Executive's employment upon 30 days written

                  notice to the Executive , and in such event, the Executive's

                  employment with the Company shall terminate effective upon the

                  30th day after receipt of such notice (provided that the

                  Executive shall not have returned to full-time performance

                  prior to such time). If the Executive's employment is

                  terminated pursuant to this paragraph, he shall receive a lump

                  sum cash payment within 30 days of the date of termination in

                  an amount equal to the sum of (A) the Executive's accrued and

                  unpaid Base Salary through the date of termination and any

                  earned but unpaid Annual Formula Bonus, (B) an Annual Formula

                  Bonus for the fiscal year in which such termination occurred,

                  prorated for the number of whole or partial months worked by

                  the Executive in such year, but based upon the Company's then

                  most current

 

 

 

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                  financial forecast of pre-tax income for such fiscal year

                  consistent with past practices, and (C) the greater of (I) the

                  aggregate amount of Base Salary that would have been paid to

                  the Executive for the remainder of the Term, assuming for

                  purposes of this Section 6(a)(ii) that the Executive would

                  have received for the remainder of the Term the highest annual

                  Base Salary paid (or in the case of Base Salary due during the

                  year of termination, payable) within five (5) years of the

                  date of termination (the "Designated Base Salary"), or (II)

                  the product of the Designated Base Salary multiplied by three

                  (3); PROVIDED THAT the amount of any Base Salary payable

                  hereunder shall be reduced by the sum of (x) amounts that have

                  been paid to the Executive under any Company-sponsored

                  disability plan providing disability benefits to the Executive

                  with respect to the disability giving rise to the termination

                  pursuant to this Section 6(a)(ii) ("Covered Disability

                  Payment") and (y) the present value, calculated in a manner

                  reasonably acceptable to the Executive, of any Covered

                  Disability Payment to be paid to the Executive. In addition,

                  the Executive and his eligible dependants shall be entitled to

                  continued Health and Welfare Coverage (as defined below) for

                  three (3) years after the date of his termination ("3-Year

                  Benefit Plan Coverage"), after which the Executive (and his

                  eligible dependants) shall be eligible for the lifetime

                  benefits provided for under Section 6(vi) of this Agreement.

 

         (iii)    CAUSE. The Company may terminate the Executive's employment

                  for Cause. As used in this Agreement, "Cause" shall mean: (A)

                  the willful and continued failure by the Executive

                  substantially to perform his duties hereunder (other than any

                  such failure resulting from the Executive's incapacity due to

                  physical or mental

 

 

 

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                  illness) after written warning from the Board specifying in

                  reasonable detail the breach(es) complained of; (B) fraud or

                  willful misconduct that has a material detrimental effect upon

                  the Company, as finally determined through arbitration or

                  final judgment of a court of competent jurisdiction (which

                  arbitration or judgment, due to the passage of time or

                  otherwise, is not subject to further appeal); or (C)

                  conviction of a criminal offense constituting a felony (which

                  conviction, due to the passage of time or otherwise, is not

                  subject to further appeal). For purposes of the foregoing, 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 without reasonable belief that Executive's

                  action or omission was in the best interests of the Company.

                  Any act or failure to act that is authorized by the Board or

                  pursuant to the advice of counsel and that is undertaken by

                  the Executive for the Company shall be conclusively presumed

                  to be done, or omitted to be done, by the Executive in the

                  best interests of the Company. The Executive's employment

                  shall not be deemed to have been terminated for Cause unless

                  the Company shall have given or delivered to the Executive (I)

                  reasonable notice setting forth the reasons for the Company's

                  intention to terminate the Executive's employment for Cause,

                  (II) an opportunity for the Executive to cure any such breach

                  during the 30-day period after the Executive's receipt of such

                  notice, (III) a reasonable opportunity, at any time during the

                  30-day period after the Executive's receipt of such notice,

                  for the Executive, together with his counsel, to be heard

                  before the Board, and (IV) a Notice of Termination (as defined

                  below) stating that, in the good faith opinion of not less

                  than 75% of the

 

 

 

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                  disinterested Board members then in office, the Executive was

                  guilty of the conduct set forth in clauses (A), (B) or (C) of

                  the preceding sentence. For purposes of this Agreement, a

                  "Notice of Termination" means a written notice which (x)

                  indicates the specific termination provision of this Agreement

                  relied upon, (y) 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 (z) specifies the termination date (which date shall be

                  not less than ninety (90) days after the giving of such

                  notice). On the termination date specified in a Notice of

                  Termination duly delivered pursuant to this paragraph, the

                  Executive's compensation and other benefits set forth in this

                  Agreement (other than Section 4(d) and other than any

                  compensation or benefit that shall have been earned or

                  otherwise accrued but not been paid as of such date) shall

                  terminate. For purposes of the foregoing, no certification by

                  the Executive, as may be required by any governmental

                  authority, of any periodic reports or other documentation

                  filed by the Company under any applicable law, rule or

                  regulation shall provide any basis for any alleged "Cause"

                  hereunder so long as the Executive reasonably relied on the

                  Company's disclosure and reporting procedures in connection

                  with Executive's review of the periodic reports or other

                  documentation underlying his certification and the Executive

                  believed that his certification was accurate at the time made

                  (such certification shall be referred to as a "Covered

                  Certification").

 

         (iv)     GOOD REASON. The Executive may terminate his employment for

                  "Good Reason." As used in this Agreement, "Good Reason" shall

                  mean: (A) the failure to elect

 

 

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                  and continue the Executive as Chairman of the Board and

                  Chairman of the Executive Committee or to nominate the

                  Executive for re-election as a member of the Board; (B) the

                  assignment to the Executive of duties, authorities,

                  responsibilities and reporting requirements inconsistent with

                  his position, or if the scope of any of the Executive's

                  material duties or responsibilities as Chief Executive Officer

                  and President of the Company is reduced or expanded to a

                  significant degree without the Executive's prior consent,

                  except for any reduction in duties and responsibilities due to

                  Executive's illness or disability and except in the event the

                  Board shall determine that the Executive shall no longer serve

                  the Company in the capacity of President and/or Chief

                  Executive Officer but permits the Executive to continue to

                  serve the Company in the capacity of Chairman of the Board of

                  Directors and Chairman of the Executive Committee; (C) a

                  reduction in or a substantial delay in the payment of the

                  Executive's compensation or benefits from those required to be

                  provided in accordance with the provisions of this Agreement;

                  (D) a requirement by the Company or the Board, without the

                  Executive's prior written consent, that the Executive be based

                  in another location that is more than a 20-mile radius from

                  the Executive's mid-town Manhattan offices as provided for

                  under Section 3, other than on travel reasonably required to

                  carry out the Executive's obligations under this Agreement;

                  (E) the failure of the Company to indemnify the Executive

                  (including the prompt advancement of expenses), or to maintain

                  directors' and officers' liability insurance coverage for the

                  Executive, in accordance with the provisions of Section 4(d)

                  hereof; (F) the Company's purported termination of the

                  Executive's employment for Cause other

 

 

 

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                  than in accordance with the requirements of this Agreement;

                  (G) a "Change of Control" as defined below shall have

                  occurred; (H) the delivery to the Board of a written notice

                  from the Executive stating that the Executive is unable to

                  deliver a Covered Certification because either (I) the Company

                  and/or its representatives have failed to cooperate or

                  otherwise have prevented the Executive from completing such

                  review as he deems necessary to deliver a Covered

                  Certification or (II) the Company and/or its representatives

                  have failed to address the Executive's reasonable concerns

                  regarding the adequacy and completeness of the periodic

                  reports or other documentation, or regarding the Company's

                  disclosure or reporting procedures, as to which the Covered

                  Certification relates, PROVIDED THAT in any such case the

                  Board fails to cure to the Executive's satisfaction any of the

                  matters addressed in subclauses (I) or (II) in a timely manner

                  prior to when the Covered Certification would otherwise have

                  been required to be filed; (I) the failure of any successor

                  company to the Company to assume this Agreement in accordance

                  with Section 9 hereof; and (J) any other breach by the Company

                  of any provision of this Agreement. For purposes of this

                  Agreement, "Change of Control" shall have the meaning set

                  forth in the Company's 1993 Stock Option Plan as of the date

                  hereof with respect to the definitions of a "Change-of-Control

                  Transaction," subject to any subsequent modifications in such

                  definitions that are more favorable to the Executive, PROVIDED

                  THAT in any event "Change of Control" shall include the

                  approval by the shareholders of the Company of any transaction

                  or series of transactions under which the Company is merged or

                  consolidated with any other company, other than a merger or

                  consolidation (I) which would result in

 

 

 

                                       17

<PAGE>

 

 

                  the voting securities of the Company outstanding immediately

                  prior thereto continuing to represent (either by remaining

                  outstanding or by being converted into voting securities of

                  the surviving entity) more than 66 2/3% of the combined voting

                  power of the voting securities of the Company or such

                  surviving entity outstanding immediately after such merger or

                  consolidation and (II) after which no person holds 20% or more

                  of the combined voting power of the then-outstanding

                  securities of the Company or such surviving entity.

 

          (v)     OTHER. If the Executive's employment is terminated by the

                  Company, other than as set forth in paragraphs (i), (ii) or

                  (iii) of this Section 6(a), or if the Executive terminates for

                  Good Reason, then (A) the Company shall continue to make

                  available to the Executive and his eligible dependants

                  continued Health and Welfare Coverage (as defined below) until

                  the later of the remainder of the Term or the 3-Year Benefit

                  Plan Coverage period, unless the Executive shall theretofore

                  deliver a written notice to the Company to the effect that he

                  elects not to accept such other benefits (and provided that

                  upon the expiration of this Agreement at the end of the Term,

                  the Executive (and his eligible dependants) shall be entitled

                  to the benefits set forth in Section 6(vi) hereof), (B) all

                  stock options held by the Executive immediately prior to such

                  termination, to the extent not theretofore fully vested and

                  exercisable, shall become fully vested and exercisable and all

                  shares of restricted stock held by the Executive immediately

                  prior to such termination shall become fully vested and free

                  of restrictions (PROVIDED THAT the vesting and exercisability

                  of those stock options granted to the Executive on October 14,

                  1998 (the "1998 Option Grant") shall continue to be governed

                  by the

 

 

 

                                       18

<PAGE>

 

                  operative terms of the Prior Agreement applicable to the 1998

                  Option Grant, and (C) the Company shall pay to the Executive,

                  on the date of termination, a lump sum cash payment equal to

                  the sum of (I) the Annual Formula Bonus pro rated through the

                  date of termination (the "Accrued Bonus") plus (II) the

                  product of (x) the sum of (1) the Executive's annual base

                  salary (as in effect immediately prior to such termination)

                  plus (2) the Annual Formula Bonus, multiplied by (y) the

                  greater of (1) the number of years (including partial years)

                  remaining in the Term (determined immediately prior to such

                  termination) or (2) 2.99. (the amounts payable to the

                  Executive pursuant to preceding subclauses (I) and (II) shall

                  be referred to as the "Termination Payment"). For purposes of

                  determining the Termination Payment, the Annual Formula Bonus

                  shall be calculated assuming the Executive is employed for the

                  entire fiscal year in which such termination occurs, but shall

                  be based upon the Company's then most current financial

                  forecast of pre-tax income for such fiscal year consistent

                  with past practices. Notwithstanding anything herein to the

                  contrary, in the event the Board and the Executive agree that

                  the Executive shall no longer serve the Company in the

                  capacity of President and/or Chief Executive Officer, then so

                  long as the Executive agrees to continue to serve the Company

                  in the capacity of Chairman of the Board of Directors and

                  Chairman of the Executive Committee, such change in position

                  and duties shall not be deemed a termination of the

                  Executive's employment by the Company within the meaning of

                  this Section 6(a)(v). Notwithstanding any provision of this

                  Agreement to the contrary, if the Executive is eligible under

                  any other plan or arrangement for any additional benefit or

 

 

 

                                       19

<PAGE>

 

                  payment in the event of a change of control of the Company

                  then the Executive shall be entitled to receive such payment

                  or benefit in accordance with the terms of such plan or

                  arrangement.

 

         (vi)     CERTAIN POST TERM BENEFITS AND OBLIGATIONS. (A) If the

                  Executive's employment under this Agreement is terminated by

                  the Company, other than as set forth in paragraphs (i) or

                  (iii) of this Section 6(a), or if the Executive terminates his

                  employment for Good Reason under this Agreement, or upon the

                  expiration of the Term (in each case, the "Post Term Period"),

                  then (I) the Company shall provide to the Executive the

                  Separation Benefits for the remainder of his life and/or the

                  Separation Benefits Buyout, if applicable, each as defined

                  below, and (II) for the remainder of his life, the Company

                  agrees to maintain the Executive as an employee (but not an

                  officer) of the Company, and the Executive agrees to keep

                  himself reasonably available to the chief executive officer of

                  the Company to render such advice and perform such services on

                  behalf of the Company as may be reasonably requested by such

                  chief executive officer (provided that the Executive shall not

                  be required to render such advice or perform such services for

                  more than ninety (90) days in any calendar year, subject to

                  the Executive's reasonable availability) (such services, the

                  "Post Term Services"), in consideration for which the

                  Executive shall receive monthly payments from the Company in

                  the amount of $83,000 (which amount shall be adjusted to

                  reflect all increases in the Consumer Price Index following

                  the Effective Date and to be adjusted annually following

                  termination of the Executive's employment to reflect any

                  increase in the Consumer Price Index from the preceding

                  calendar year) (the

 

 

 

                                       20

<PAGE>

 

 

                  "Post Term Compensation"). The Company's obligations set forth

                  in this Section 6(a)(vi) are not to be subject to setoff or

                  reduction, PROVIDED, HOWEVER, that (x) the Company's

                  obligation to continue to employ the Executive and pay any

                  future Post Term Compensation not yet then accrued shall

                  terminate if during the Post Term Period (1) the Executive

                  should become totally and permanently unable to provide the

                  Post Term Services, (2) absent a breach of this Agreement by

                  the Company, the Executive is otherwise unwilling to continue

                  to perform the Post Term Services, (3) the Executive is

                  convicted of a criminal offense constituting a felony (which

                  conviction, due to the passage of time or otherwise, is not

                  subject to further appeal) or (4) the Executive is found to

                  have breached the restrictive covenants set forth in this

                  Agreement, if applicable, (y) the Company's obligation to pay

                  and/or continue any Separation Benefits (as defined below) not

                  yet then accrued shall terminate upon the occurrence during

                  the Post Term Period of any of the events described in

                  subclauses (2), (3) or (4) in clause (x) above (the "Benefit

                  Termination Events") and (z) upon the occurrence of the event

                  described in subclause (1) in clause (x) above, the Company

                  shall only have an obligation to continue to provide Health

                  and Welfare Coverage (as defined below) and no other component

                  of the Separation Benefits (as defined below). (B) For

                  purposes of this Section 6(a)(vi), the following benefits,

                  services, facilities and perquisites shall constitute

                  "Separation Benefits":

 

                  (I)      all group and/or executive hospitalization, medical

                           or health programs, dental, vision and disability

                           insurance coverage (for himself and his eligible

                           dependents) to the extent provided generally to all

                           full-time

 

 

 

                                       21

<PAGE>

 

 

                           employees of the Company, and/or to the extent

                           provided additionally to all senior officers of the

                           Company at no additional cost to the Executive or his

                           family and/or dependents and on a basis no less

                           favorable than was provided to him during his

                           employment (collectively "Health and Welfare

                           Coverage"), PROVIDED that the Executive executes

                           appropriate enrollment materials;

 

                  (II)     office space convenient to the Executive's primary

                           residence and suitable in respect of the services

                           which the Executive provides to the Company

                           hereunder, along with suitable clerical support;

 

                  (III)    access to Company-owned or leased aircraft or charter

                           equivalent thereof on terms then applicable to senior

                           executives of the Company;

 

                  (IV)     access to one Company-provided car and driver;

 

                  (V)      appropriate personal security to be provided when

                           traveling on Company business;

 

                  (VI)     reimbursement for any properly documented business

                           expenses incurred on behalf of the Company.

 

 

                  (C) In lieu of providing those Separation Benefits listed

                  under Section 6(a)(vi)(B)(I) through (V), but not clause (VI),

                  and including the Post Term Compensation, and provided a

                  Benefit Termination Event has not occurred, the Company may

                  elect to substitute one or more cash lump-sum payments to

                  satisfy in full or in part any or all of such Company

                  obligations to the Executive as provided for herein with

                  respect to the Separation Benefits and Post Term Compensation

                  (the "Separation Benefits Buyout"); PROVIDED the Company has

 

 

 

                                       22

<PAGE>

 

                  provided thirty days' advance written notice to the Executive

                  of its election hereunder. In the event of a Separation

                  Benefits Buyout with respect to the Post Term Compensation,

                  the Executive shall have no further obligation to provide the

                  Post Term Services. The amount of any cash lump-sum payment to

                  be made to the Executive with respect to the Separation

                  Benefits Buyout shall be determined by reasonable agreement of

                  the parties hereto, after providing good faith consideration

                  to the following factors, to the extent applicable: (u) the

                  historical and forecast cost to the Company for providing the

                  applicable item; (v) the forecast cost to the Executive for

                  purchasing a comparable replacement of the applicable item;

                  (w) any relevant actuarial considerations to the extent such

                  items are required to be provided for the life of the

                  Executive; (x) any appropriate adjustments to reflect net

                  present value and/or inflationary considerations; (y) any

                  appropriate adjustment to reflect the obligations of the

                  Executive under Section 8; and (z) any relevant taxation

                  considerations applicable to the Executive's receipt of a

                  current lump-sum payment. The Company shall provide the

                  Executive with all work papers supporting its determination

                  and calculation of the Separation Benefits Buyout. Any

                  disputes as to the amount to be paid in accordance with a

                  Separation Benefits Buyout shall be settled by an independent

                  third party reasonably acceptable to the parties hereto within

                  sixty (60) days after submission of any such dispute by the

                  parties, and shall be final and binding on all parties hereto.

                  The Separation Benefits Buyout shall be in addition to, and

                  not in lieu of, any other payments, severance or otherwise,

                  owed by the Company to the

 

 

 

                                       23

<PAGE>

 

                  Executive. Any payment made in respect of a Separation

                  Benefits Buyout shall be subject to the approval of the

                  Company's Audit Committee. (D) Upon the occurrence of a

                  Potential Change in Control or Change in Control during the

                  Post Term Period, the Executive may elect to receive, and the

                  Company shall be required to immediately pay to the Executive,

                  the Separation Benefits Buyout as determined pursuant to this

                  subparagraph (D). In the event the Executive makes the

                  foregoing election, such election shall be accompanied by a

                  written determination of a national accounting firm selected

                  by the Executive setting forth the amount of the Separation

                  Benefits Payout, after applying the factors and considerations

                  set forth in subparagraph 6(a)(vi)(C) above, and the

                  determination of such firm shall be final and binding on the

                  Company. The Company shall bear all costs and expenses

                  incurred in connection with the retention of such accounting

                  firm.

 

         (vii)    INTEGRATION. Notwithstanding any other provision of this

                  Agreement to the contrary, to the extent that the Company is

                  obligated to provide Health and Welfare Coverage and payments

                  to the Executive pursuant to Section 6(a)(v)(A) and (C) as a

                  result of a termination of the Executive's employment with

                  less than three (3) years remaining in the Term, then the

                  amount otherwise payable to the Executive pursuant to the

                  foregoing provisions of this Section 6 shall be reduced so

                  that the aggregate value of such Health and Welfare Coverage

                  and payments (other than the portion of the Termination

                  Payment attributable to the Accrued Bonus) shall not exceed

                  the sum of the Executive's annual base salary (as in

 

 

                                       24

<PAGE>

 

                  effect immediately prior to such termination) plus the Annual

                  Formula Bonus determined pursuant to Section 6(a)(v),

                  multiplied by 2.99.

 

         (b) RESIGNATION. If the Executive voluntarily resigns his employment

under this Agreement during the Term (other than for Good Reason), the

Executive's compensation and other benefits (other than those under Section 4(d)

and other than any compensation or benefit that shall have accrued but not been

paid as of the date of such resignation) set forth in this Agreement shall

thereupon terminate.

 

         (c) RABBI TRUST FUNDED UPON POTENTIAL CHANGE IN CONTROL OR CHANGE IN

CONTROL. In the event of a Potential Change in Control or Change in Control, the

Company shall, not later than 15 days thereafter, have established one or more

rabbi trusts and shall deposit therein cash in an amount sufficient to provide

for full payment of all potential obligations of the Company that would arise

assuming consummation of a Change in Control, or that have arisen in the case of

an actual Change in Control and a subsequent termination of Executive's

employment under Section 6(a)(iv) or Section 6(a)(v). Such rabbi trust(s) shall

be irrevocable and shall provide that the Company may not, directly or

indirectly, use or recover any assets of the trust(s) until such time as all

obligations which potentially could arise hereunder have been settled and paid

in full, subject only to the claims of creditors of the Company in the event of

insolvency or bankruptcy of the Company; PROVIDED, HOWEVER, that if no Change in

Control has occurred within two years after such Potential Change in Control,

such rabbi trust(s) shall at the end of such two-year period become revocable

and may thereafter be revoked by the Company. For purposes of this Agreement, a

"Potential Change in Control" shall be deemed to have occurred if, during the

term of this Agreement: (i) the Company enters into an agreement, the

consummation of which would result in the occurrence of a Change in Control;

(ii) any Person

 

 

 

                                       25

<PAGE>

 

 

(including the Company) publicly announces an intention to take or to consider

taking action which if consummated would constitute a Change in Control; or

(iii) the Board adopts a resolution to the effect that, for purposes of this

Agreement, a Potential Change in Control has occurred.

 

         7. ADDITIONAL EXCISE TAX PAYMENT. (a) Anything in this Agreement or in

any other plan, program or agreement to the contrary notwithstanding and except

as set forth below, in the event that (i) the Executive becomes entitled to any

benefits or payments under this Agreement in connection with a termination of

employment including any Post Term Compensation, Separation Benefits and/or

Separation Benefits Buyout, and (ii) it shall be determined that any payment or

distribution by the Company 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 Gross-Up Payments

(as defined below) made hereunder, such payments being referred to herein as the

"Payments") would be subject to the excise tax imposed by Section 4999 of the

Internal Revenue Code of 1986, as amended (the "Code") or 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, are 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

Payments.

 

 

                                       26

<PAGE>

 

         (b) Subject to the provisions of Section 7(c), all determinations

required to be made under this Section 7, 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 Deloitte &

Touche LLP or such other certified public accounting firm as may be designated

by the Executive and reasonably acceptable to the Company (the "Accounting

Firm") which shall provide detailed supporting calculations both to the Company

and the Executive within 15 business days of the receipt of notice from the

Executive, or such earlier time as is requested by the Company. In the event

that the Accounting Firm is serving as accountant or auditor for the individual,

entity or group effecting the Change-of-Control Transaction, the Executive and

the Audit Committee of the Company shall mutually agree to 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 Company. Any Gross-Up Payment, as determined pursuant to this

Section 7, shall be paid by the Company to the Executive within ten days of the

receipt of the Accounting Firm's determination. Any determination by the

Accounting Firm shall be binding upon the Company 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 Company should have been

made ("Underpayment"), consistent with the calculations required to be made

hereunder. In the event that the Company exhausts its remedies pursuant to

Section 7(c) and the Executive thereafter is required to make a payment of any

Excise Tax, the Accounting Firm shall determine the amount

 

 

 

                                       27

<PAGE>

 

 

of the Underpayment that has occurred and any such Underpayment shall be

promptly paid by the Company to or for the benefit of the Executive.

 

         (c) The Executive shall notify the Company in writing of any claim by

the Internal Revenue Service that, if successful, would require the payment by

the Company of the Gross-Up Payment. Such notification shall be given as soon as

practicable but no later than ten business days after the Executive is informed

in writing of such claim and shall apprise the Company 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 30-day period following

the date on which the Executive gives such notice to the Company (or such

shorter period ending on the date that any payment of taxes with respect to such

claim is due). If the Company 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 Company any information reasonably requested by the

                  Company relating to such claim,

 

         (ii)     take such action in connection with contesting such claim as

                  the Company 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 Company,

 

         (iii)    cooperate with the Company in good faith in order effectively

                  to contest such claim, and

 

         (iv)     permit the Company to participate in any proceedings relating

                  to such claim;

 

 

                                       28

<PAGE>

 

 

PROVIDED, HOWEVER, that the Company 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 limitation on the foregoing provisions of

this Section 7(c), the Company shall control all proceedings taken in connection

with such contest and, at its sole option, may pursue or forgo 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 Company shall

determine; PROVIDED, HOWEVER, that if the Company directs the Executive to pay

such claim and sue for a refund, the Company 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 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 Company'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.

 

 

                                       29

<PAGE>

 

         (d) If, after the receipt by the Executive of an amount advanced by the

Company pursuant to Section 7, the Executive becomes entitled to receive any

refund with respect to such claim, the Executive shall (subject to the Company's

complying with the requirements of Section 7(c)) promptly pay to the Company 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 Company pursuant to Section 7(c), a determination is made that

the Executive shall not be entitled to any refund with respect to such claim and

the Company does not notify the Executive in writing of its intent to contest

such denial of refund prior to the expiration of 60 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 Gross-Up Payment required to be paid.

 

         (e) The provisions of this Section 7 shall be in addition to any rights

to payment available to the Executive under the terms of the Tax Gross-Up

Program and to the extent the provisions of this Section 7 are more favorable to

the Executive than the terms of the Tax Gross-Up Program, the provisions of this

Section 7 shall control. The Company shall not terminate or amend the Tax

Gross-Up Program without the Executive's consent.

 

         8. OTHER COVENANTS BY THE EXECUTIVE. (a) During the Restricted Period

(as defined in Section 8(c)), neither the Executive nor any "Controlled

Affiliate" will, without the prior written consent of the Board, in any way

directly or indirectly hire or attempt to hire any person who, to the

Executive's best knowledge, was employed at any time during the period

commencing six months prior to the termination of the Executive's employment

with the Company, as an officer or executive or professional employee of the

Company or any of its subsidiaries or affiliates. As used in this Agreement,

"Controlled Affiliate" means any company,

 

 

 

                                       30

<PAGE>

 

 

partnership, firm or other entity as to which the Executive possesses, directly

or indirectly, the power to direct or cause the direction of the management and

policies of such entity, whether through the ownership of voting securities, by

contract or otherwise.

 

         (b) The Executive acknowledges that, through his status as Chairman of

the Board, President and Chief Executive Officer of the Company, he has and will

have possession of important, confidential information and knowledge as to the

Company's business, including, but not limited to, knowledge of marketing and

operating strategies, franchise agreements, financial results and projections,

future plans, the provisions of important contracts entered into by the Company

and possible acquisitions and divestitures. The Executive agrees that such

knowledge and information constitute a vital part of the business of the Company

and are by their nature trade secrets and confidential information

(collectively, "Confidential Information"). The Executive agrees that he shall

not, so long as the Company or any successor remains in existence, divulge,

communicate, furnish or make accessible (whether orally or in writing or in

books, articles or any other medium) to any individual, firm, partnership or

corporation any knowledge and information with respect to Confidential

Information directly or indirectly useful in any aspect of the business of the

Company. As used in the preceding sentence, "Confidential Information" shall not

include any knowledge or information which (i) is or becomes available to others

or the public, other than as a result of breach by the Executive of this Section

8(b), (ii) was available to the Executive on a nonconfidential basis prior to

its disclosure to the Executive through his status as an officer of the Company

or (iii) becomes available to the Executive on a nonconfidential basis from a

third party (other than the Company or its representatives) who is not bound by

any confidentiality obligation to the Company.

 

 

                                       31

<PAGE>

 

 

         (c) During the Restricted Period, neither the Executive nor any of his

Controlled Affiliates will render any services, directly or indirectly, as an

employee, officer, consultant or in any other capacity, to any individual, firm,

corporation or partnership engaged in business activities that are competitive

with any business segment activities in which the Company or its subsidiaries or

affiliates are engaged at the time of such termination (such competitive

businesses being herein called the "Company Business"). During the Restricted

Period, the Executive shall not, without the prior written consent of the

Company, hold an equity interest in any firm, partnership or corporation which

competes with the Company Business, except that beneficial ownership by the

Executive (together with any one or more members of his immediate family and

together with any entity under his direct or indirect control) of less than 1%

of the outstanding shares of capital stock of any corporation which may be

engaged in any of the same lines of business as the Company Business which stock

is listed on a national securities exchange or publicly traded in the

over-the-counter market shall not constitute a breach of the covenants in this

Section 8(c). As used in this Agreement, "Restricted Period" shall mean (i) if

the Executive's employment with the Company shall be terminated for Cause or by

the Executive's voluntary resignation (except any such resignation for Good

Reason or arising from a breach of this Agreement by the Company), the period

beginning on the date of such termination and ending on the second anniversary

thereof and (ii) if the Executive's employment with the Company under this

Agreement shall be terminated under any circumstances other than those to which

clause (i) above applies, the period beginning on the date of such termination

and ending on the later of (A) the second anniversary thereof or (B) the "Post

Term Cessation Date" (as defined below). For purposes of the foregoing sentence,

the "Post Term Cessation Date" shall mean the earlier of (I) the date that the

Company ceases

 

 

 

                                       32

<PAGE>

 

 

making payments of Post Term Compensation or ceases providing Separation

Benefits in breach of this Agreement, or (II) the date that the Executive shall

deliver a written notice to the Company to the effect that he elects not to

accept such Post Term Compensation, unless the parties otherwise agree to a

different expiration date for the Restricted Period in connection with the

determination and payment of the Separation Benefits Buyout. Notwithstanding the

foregoing, in the event the Separation Benefits Buyout is paid to the Executive

covering all of the Executive's lifetime rights with respect to the Post Term

Compensation and the Separation Benefits listed under Section 6(a)(vi)(B)(I)

through (V), the Restricted Period shall terminate as of the Executive's death.

 

         (d) The Executive agrees that the provisions of Sections 8(a), (b) and

(c) may not be adequately enforced by an action for damages and that, in the

event of a breach thereof by the Executive or any such other entity, the Company

shall be entitled to seek injunctive relief in any court of competent

jurisdiction to restrain the breach or threatened breach of such violation or

otherwise to enforce specifically such provisions against such violation.

 

         9. SUCCESSORS: BINDING AGREEMENT. (a) This Agreement is personal to

each of the parties hereto, and neither party may assign nor delegate any of its

rights or obligations hereunder without the prior written consent of the other.

The Company will require any successor (whether direct or indirect, by purchase,

merger, consolidation or otherwise) to all or substantially all the business

and/or assets of the Company, by agreement in form and substance satisfactory to

the Executive, expressly to assume and agree to perform this Agreement in the

same manner and to the same extent that the Company would be required to perform

it if no such succession had taken place.

 

 

                                       33

<PAGE>

 

 

         (b) This Agreement and all rights of the Executive hereunder shall

inure to the benefit of and be enforceable by the Executive's personal legal

representatives, executors, administrators, successors, heirs, distributees,

devisees and legatees.

 

         10. NOTICE. For the purposes of this Agreement, notices, demands and

all other communications provided for in this Agreement shall be in writing and

shall be given either by hand delivery or (unless otherwise specified) mailed by

United States certified or registered mail, return receipt requested, postage

prepaid, addressed as follows:

 

                  If to the Executive:

 

                      Henry R. Silverman

                      9 West 57th Street

                      New York, New York 10019

 

                  If to the Company:

 

                      Cendant Corporation

                      1 Campus Drive

                      Parsippany, New Jersey 07054

                      Attention:  General Counsel

 

or to such other address as any party may have furnished to the others in

writing in accordance herewith, except that notices of change of address shall

be effective only upon receipt. Notice and communications shall be effective

when actually received by the addressee.

 

         11. MISCELLANEOUS. (a) No provisions of this Agreement may be amended,

supplemented, modified, cancelled or discharged unless such amendment,

supplement, modification, cancellation or discharge is agreed to in writing

signed by the Executive and a duly authorized officer of the Company (other than

the Executive); and no provisions hereof may be waived except in writing so

signed by or on behalf of the party granting such waiver. No waiver by either

party hereto at any time of any breach by the other party hereto of, or

compliance with, any condition or provision of this Agreement to be performed by

such other party shall be

 

 

 

                                       34

<PAGE>

 

 

deemed a waiver of similar or dissimilar provisions or conditions at the same or

at any prior subsequent time. This Agreement shall be governed by and

interpreted in accordance with the laws of the State of New York applicable to

agreements made and to be performed entirely within such State. The obligations

of the Company, the Successor and the Executive under this Agreement, which by

their nature may require either partial or total performance after the

expiration of this Agreement or the termination of the Executive's employment

(including, without limitation, under Sections 4, 6 and 7 hereof) shall survive

such expiration and termination.

 

         (b) The Company represents and warrants to the Executive that: (i) the

Company has all necessary power and authority to execute and deliver this

Agreement and to consummate the transactions contemplated hereby; (ii) the

execution and delivery of this Agreement and the consummation of the

transactions contemplated hereby have been duly and validly authorized and

approved by the Company and no other corporate proceedings on the part of the

Company are necessary to authorize this Agreement or to consummate the

transactions contemplated hereby; and (iii) this Agreement has been duly and

validly executed and delivered by the Company and constitutes a valid and

binding agreement of the Company enforceable in accordance with its terms.

 

         (c) After a termination of employment for any reason, the Executive

shall not be obligated to mitigate damages by seeking other comparable

employment, and any payments or benefits payable or due to the Executive shall

not be subject to reduction as a result of any compensation received from other

employment or from any other source whatsoever.

 

         (d) The Company shall pay all reasonable attorneys' fees and related

costs incurred by the Executive in connection with the negotiation of this

Agreement.

 

 

                                       35

<PAGE>

 

         (e) The amounts required to be paid by the Company to the Executive

pursuant to this Agreement shall not be subject to offset.

 

         12. VALIDITY. The invalidity or unenforceability of any provision or

provisions of this Agreement shall not affect the validity or enforceability of

any other provision of this Agreement, which shall remain in full force and

effect.

 

         13. ARBITRATION. Any dispute or controversy arising under or in

connection with this Agreement shall be settled conclusively by arbitration,

conducted before a panel of three arbitrators in New York, New York, in

accordance with the rules of the American Arbitration Association then in

effect. One arbitrator shall be selected by the Executive, one by the Company

and the third arbitrator shall be selected by the first two arbitrators;

PROVIDED THAT if the first two arbitrators cannot agree on appointment of the

third, the American Arbitration Association rules shall govern the process for

selection of the third arbitrator. Judgment may be entered on the arbitrators'

award in any court having jurisdiction; PROVIDED, HOWEVER, that the Company

shall be entitled to seek a restraining order or injunction in any court of

competent jurisdiction to prevent any continuation of any violation of the

provisions of Section 8 and the Executive hereby consents that such restraining

order or injunction may be granted without the necessity of the Company's

posting any bond. The expenses of the arbitration shall be borne by the Company;

and the Company shall bear its own legal fees and expenses and pay, at least

monthly, all of the Executive's legal fees and expenses incurred in connection

with such arbitration regardless of the outcome, except that the Executive shall

have to reimburse the Company for his legal fees and expenses if the arbitrators

find that Executive brought an action in bad faith.

 

         14. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of

the parties hereto in respect of the subject matter contained herein and shall

be deemed an extension of the

 

 

 

                                       36

<PAGE>

 

 

Prior Agreement and shall supersede all prior agreements, promises, covenants,

arrangements, communications, representations or warranties, whether oral or

written by any officer, employee or representative of any party hereto, and any

prior agreement of the parties hereto in respect of the subject matter contained

herein (PROVIDED THAT the terms of the Prior Agreement shall survive and govern

solely with respect to the vesting and exercisability of the 1998 Option Grant

as provided for therein).

 

                           [signature page to follow]

 

 

 

                                       37

<PAGE>

 

 

 

           [Amended and Extended Employment Agreement Signature Page]

 

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the

date and year first above written.

 

                                           CENDANT CORPORATION

 

 

                                           By: /s/ James E. Buckman

                                              ---------------------------------

                                           Name:

                                           Title: Vice Chairman &

                                                  General Counsel

 

 

                                           HENRY R. SILVERMAN

 

                                           /s/ Henry R. Silverman

                                           ------------------------------------

 

 

 

 

 

 

 

                                       38

 

Back to Top


FIRST AMENDMENT
TO AMENDED AND EXTENDED
EMPLOYMENT AGREEMENT

        This First Amendment (this "Amendment") to the Amended and Extended Employment Agreement dated as of July 1, 2002 (the "Employment Agreement") by and between Cendant Corporation (the "Company") and Henry R. Silverman (the "Executive") is hereby entered into by and among the Company, the Executive, the Trustee of the Henry R. Silverman 1999 Insurance Trust (the "1999 Trust") and the Trustee of the Henry R. Silverman 2000 Insurance Trust (the "2000 Trust" and, collectively with the 1999 Trust, the "Trusts") and shall become effective this 28th day of July, 2003.

        WHEREAS, the Company and the Executive entered into the Employment Agreement; and

        WHEREAS, the Company and the Executive, as well as the Trustee of the 1999 Trust, entered into a Split Dollar Agreement dated as of August 23, 2000 (the "1999 Split Dollar Agreement"); and

        WHEREAS, the Company and the Executive, as well as the Trustee of the 2000 Trust, entered into a Split Dollar Agreement dated as of August 23, 2000 (the "2000 Split Dollar Agreement" and, collectively with the 1999 Split Dollar Agreement, the "Split Dollar Agreements"); and

        WHEREAS, as collateral security for the liability of the Trusts to the Company under the Split Dollar Agreements, the Trustee of the Trusts executed a limited collateral assignment in connection with each of the Split Dollar Agreements (the "Limited Collateral Assignments"); and

        WHEREAS, the Employment Agreement provides that the Company shall maintain for the Executive's life term life insurance in the aggregate face amount of $100 million pursuant to which the Executive shall have the right to name the beneficiaries (the "Insurance Entitlement"); and

        WHEREAS, the Company and the Executive have agreed that the Company shall have the right to provide the insurance benefits contemplated under the Split Dollar Agreements in lieu of providing the Insurance Entitlement; and

        WHEREAS, the Company, the Executive and the Trusts have agreed that, in light of, among other things, the passage of the Sarbanes-Oxley Act of 2002, it would be in the mutual best interests of the Company, the Executive and the Trusts to terminate the Company's obligations pursuant to the Insurance Entitlement, amend and restate the Split Dollar Agreements, and provide the Executive with a life insurance benefit in the manner described in this Amendment.

        NOW, THEREFORE, in consideration of the foregoing and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to the terms and conditions set forth below.

        1.    Amendment and Restatement of Split Dollar Agreements.    Contemporaneously with the execution of this Amendment, the 1999 Split Dollar Agreement and the 2000 Split Dollar Agreement shall each be amended and restated to conform to the provisions of this Amendment, and, except as otherwise provided in paragraph 2 of this Amendment, the provisions of the Split Dollar Agreements and the Limited Collateral Assignments, including, without limitation the Policies (as respectively defined in each of the Split Dollar Agreements), shall, with respect to all Policies that have not been terminated as provided for herein, continue in full force and effect until all of the New Policies and Key Man Insurance described herein are implemented and the full life insurance protection described herein to be provided under the New Policies and the Key Man Insurance is in full force and effect (the "Implementation Date").

        2.    Termination of the Policies.    Upon the Company's acquisition of a New Policy described in paragraph 4A of this Amendment and the endorsement of the death benefit of such New Policy to the Trusts in the manner set forth in paragraph 4A of this Amendment, the Trusts shall contemporaneously therewith terminate for its/their cash surrender value one or more of the Policies (as respectively


 

defined in each of the Split Dollar Agreements) with an aggregate face amount equal to the face amount of such New Policy; provided, however, that prior to the Company's acquisition of the Key Man Insurance described in paragraph 4A of this Amendment, the Trusts shall keep in full force one or more Policies with an aggregate face amount equal to the sum of (i) the aggregate premiums payable by the Company on the first year's insurance coverage on the New Policies and (ii) the "Advances" (as such term is defined in the Split-Dollar Agreements) with respect to such one or more Policies that are being kept in force pursuant to this proviso. Upon receipt of the cash surrender value under any such terminated Policy or Policies, the Trusts shall immediately thereafter transfer all cash surrender value under such terminated Policy or Policies to the Company for its sole and exclusive benefit. Upon the termination of any such Policy, such terminated Policy shall thereafter not be subject to the terms and conditions of the Split Dollar Agreements, and the Limited Collateral Assignment with respect to such terminated Policy shall terminate. The parties hereby agree to cooperate (including by executing appropriate documents) to implement the matters contemplated in this paragraph 2.

        3.    Termination of the Insurance Entitlement.    Section 4(g) of the Employment Agreement is hereby deleted and of no further force or effect effective as of the Implementation Date. The Executive hereby acknowledges and agrees that the obligations of the Company as set forth in this Amendment constitute the sole and exclusive obligations of the Company with respect to life insurance coverage for the benefit of the Executive (other than group life insurance).

        4A.    Acquisition of New Insurance; Endorsement.    As promptly as practicable after the execution of this Amendment, the Company shall acquire one or more life insurance policies on the life of the Executive with an aggregate face amount of $100 million (individually a "New Policy" and collectively the "New Policies"). The New Policies shall be underwritten by one or more insurance companies reasonably acceptable to both the Company and the Trusts and shall otherwise in all respects be reasonably acceptable to both the Company and the Trusts. The Trusts hereby consent to the Company's acquisition of the New Policies and agree to take all reasonable actions, including executing such appropriate documents, in each case as necessary to facilitate the acquisition of the New Policies. The Company shall promptly endorse to the Trusts $100,000,000 of life insurance under the New Policies and the sole and exclusive right to name the beneficiary with respect to the $100,000,000 of life insurance under the New Policies (the "Endorsements"). The Endorsements shall be substantially in the form attached hereto as Exhibit A1. As promptly as practicable after the execution of this Amendment, the Company shall also acquire one or more life insurance policies on the life of the Executive with an aggregate face amount of $37.5 million (the "Key Man Insurance"). The Company shall at all times remain the beneficiary of the Key Man Insurance; provided, however, that each and every time the Company pays a premium on the New Policies and/or the Key Man Insurance, the Company shall promptly endorse to the Trusts (i) an additional death benefit under the Key Man Insurance equal to the sum of (a) the amount of such premium paid by the Company on the New Policies, and (b) the amount of such premium paid by the Company on the death benefit under the Key Man Insurance then being endorsed to the Trusts under clause (a) above; and (ii) the sole and exclusive right to name the beneficiary with respect to the amount of the death benefit under the Key Man Insurance endorsed to the Trusts under clause (i) above. Such endorsement with respect to the Key Man Insurance shall be substantially in the form attached hereto as Exhibit A2.

        4B.    Allocation of Life Insurance Endorsed to Trusts.    Notwithstanding any provision in this Agreement to the contrary, any life insurance under the New Policies and the Key Man Insurance that is directed to be endorsed to the Trusts under this Agreement shall be allocated as follows: (i) seventy-five percent (75%) of such life insurance shall be endorsed to the 1999 Trust and the 1999 Trust shall have the sole and exclusive right to name the beneficiary with respect to seventy-five percent (75%) of such life insurance, and (ii) twenty-five percent (25%) of such life insurance shall be endorsed to the 2000 Trust and the 2000 Trust shall have the sole and exclusive right to name the beneficiary with respect to twenty-five percent (25%) of such life insurance.

2


 

        5A.    Premium Payments—Prior to Purchase Election.    The Company shall at all times be solely responsible for making all premium payments in respect of the Key Man Insurance; provided, however, that the Company shall have the right in its sole discretion to terminate the Key Man Insurance following the exercise of the Purchase Election (as defined in paragraph 6 below) with respect to all (but not less than all) of the New Policies. At all times prior to the exercise of the Purchase Election with respect to all (but not less than all) of the New Policies: (i) the Trusts shall be responsible for contributing a portion of all premium payments, on a timely basis, into the New Policies with respect to which a Purchase Election has not been made in an amount equal to the Economic Benefit (as defined below) to the Executive in respect of the New Policies with respect to which a Purchase Election has not been made; (ii) the Company shall be responsible for making the Required Premium Payments (as defined below), on a timely basis, into the New Policies with respect to which a Purchase Election has not been made; and (iii) after giving effect to clauses (i) and (ii), in the event the premium payments under the New Policies are not paid in full (or not paid to the extent necessary to maintain the full face amount), any remaining premium payments shall be payable by the Trusts at their sole option. At any time following the exercise of the Purchase Election with respect to all (but not less than all) of the New Policies, the Company shall have the right in its sole discretion to terminate the Key Man Insurance. For purposes of this paragraph 5A, (i) Economic Benefit shall mean an amount equal to the annual cost of current life insurance protection on the life of the Executive with a death benefit of $100,000,000 reduced by an amount equal to the aggregate death benefit of any New Policies with respect to which a Purchase Election has been made, measured by the lower of the Table 2001 rate (as originally published in Internal Revenue Service Notice 2001-10) or the applicable insurance company's current published premium rate for annually renewable term insurance for standard risks, and (ii) Required Premium Payments shall mean the payments set forth on Exhibit B hereto taking into account the footnotes thereon.

        5B.    Effect of the Executive's Death—Prior to Purchase Election.    If the Executive dies prior to the Purchase Election with respect to all (but not less than all) of the New Policies, the Company will receive from the death benefits payable by the insurance company or companies that issued the New Policies with respect to which a Purchase Election has not been made the greater of (i) total amount of premiums paid on the New Policies with respect to which a Purchase Election has not been made or (ii) the cash surrender value of the New Policies with respect to which a Purchase Election has not been made.

        5C.    Effect of Reduction in Face Amount of Insurance.    The parties agree that the Trusts shall have the right to reduce the aggregate face amount of insurance coverage in respect of any New Policy at any time. In the event that the Trusts determine to reduce the aggregate face amount of insurance coverage in respect of any New Policy, then there shall be an equal percentage reduction to both the Required Premium Payments applicable to that New Policy, and the amounts required to be paid by the Trusts in respect of such New Policy pursuant to paragraph 5A(i) above in respect of the Economic Benefit.

        6.    Purchase Election.    At any time, and from time to time, each Trust shall have the right to purchase any or all of the New Policies allocated to such Trust pursuant to paragraph 4B above (the "Purchase Election") by making a payment to the Company equal to the aggregate cash surrender value (as of the purchase date) of the policy or policies being purchased (the "Exercise Price"). In connection with any such exercise, the Company shall make a cash bonus payment to the Executive equal to the Exercise Price. In the event that the Purchase Election is exercised during any calendar year with respect to a New Policy, all premium payments (including Required Premium Payments) in respect of any such New Policy shall thereafter be the sole and exclusive responsibility of the Trust that exercised the Purchase Election with respect to such New Policy. As of the date any New Policy is purchased in full, the Endorsement with respect to such New Policy shall terminate and such New Policy shall thereafter not be subject to the terms and conditions of the Split-Dollar Agreements, as

3


 

amended and restated in accordance with paragraph 1 of this Amendment. As of the date any New Policy is purchased in part, the amount of life insurance required to be endorsed to the Trusts under paragraph 4A of this Amendment shall be reduced by the face amount of death benefits with respect to New Policies that are purchased by the Trusts.

        7A.    Post-Exercise Bonus Program.    Following the exercise of the Purchase Election, the Company shall have no further obligations to make the Required Premium Payments or any other payments in respect of any New Policy in respect of which the Purchase Election was made. All premium payments (including Required Premium Payments) in respect of any such New Policy shall thereafter be the sole and exclusive responsibility of the Trusts. Following the exercise of any such Purchase Election, the Company shall make a cash bonus payment (the "Cash Bonus Payment") to the Executive on an annual basis in an amount equal to the premium payments made by the Trusts during such year in respect of the New Policy in respect of which the Purchase Election was made, including, if applicable, a pro rata Cash Bonus Payment in respect of the partial calendar year after which the Purchase Election is exercised (the "Annual Bonus Program"). The Cash Bonus Payment amounts under the Annual Bonus Program are set forth on Exhibit C hereto, assuming that the Purchase Election has been exercised with respect to all New Policies. To the extent the Purchase Election has been exercised with respect to some, but not all, of the New Policies, Cash Bonus Payments under the Annual Bonus Program shall equal the amounts reflected in the footnotes to Exhibit C for the New Policies with respect to which a Purchase Election has been made in full and shall be prorated for the New Policies with respect to which a Purchase Election has been made in part based on a fraction the numerator of which is the face amount purchased by the Trusts of the New Policies with respect to which the Purchase Election has been exercised in part, and the denominator of which is the aggregate face amount of the New Policies with respect to which a purchase election has been made in part. At the time of each Cash Bonus Payment under the Annual Bonus Program, the Company shall make an additional payment (the "Bonus Reimbursement Payment") to the Executive in an amount equal to the sum of (i) the income taxes imposed upon the Cash Bonus Payment, (ii) the gift taxes that would be imposed assuming the Executive gifted to the Trusts an amount equal to the Cash Bonus Payment, and (iii) an additional amount such that, after imposition of income taxes on the payments made pursuant to clauses (i) and (ii) above, as well as on the payments described in this clause (iii), the Executive retains an amount equal to the aggregate payments determined under clauses (i) and (ii) above. For purposes of determining the Bonus Reimbursement Payment, the Executive shall be deemed to (i) pay Federal income and gift taxes at the Executive's highest applicable marginal rate of Federal income and gift taxation, as applicable, for the calendar year in which the Bonus Reimbursement Payment is to be made and (ii) pay any applicable state and local income and gift taxes at the Executive's highest applicable marginal rate of income and gift taxation, as applicable, for the calendar year in which the Bonus Reimbursement Payment is to be made, net of the maximum reduction in Federal income or gift taxes, as applicable, which could be obtained from deduction of such state and local income or gift taxes, as applicable, if paid in such year. All payments pursuant to this paragraph 7A shall be treated as cash compensation paid by the Company to the Executive for tax purposes. All payments (other than any payments accrued but unpaid prior to the Executive's death) pursuant to this paragraph 7A shall cease upon the Executive's death.

        7B.    Effect of New Policy Investments.    The parties acknowledge and agree that the estimated amounts to be paid pursuant to the Annual Bonus Program, as set forth on Exhibit C hereto, were determined based upon an assumed rate of return on the underlying investments in respect of each New Policy (the "Assumed Rate"). Accordingly, notwithstanding paragraph 7A and Exhibit C to the contrary, (i) in the event that any New Policy experiences investment returns in excess of its Assumed Rate, any resulting decrease in the premium payments shall result in a corresponding decrease in payments by the Company under the Annual Bonus Program, and (ii) in the event that any New Policy experiences investment returns below its Assumed Rate, any resulting increase in the premium payments shall result in a corresponding increase in payments by the Company under the Annual

4


 

Bonus Program; provided, however, that in no event shall the Company bear responsibility for increased payments under the Annual Bonus Program to the extent such increases are a result of investment returns below the guaranteed rate in effect with respect to any New Policy or any insurance company default under any New Policy.

        8.    Termination.    The obligations of the parties pursuant to this Amendment shall remain in full force and effect notwithstanding the termination of the Employment Agreement for any reason or the termination of the Executive's employment with the Company for any reason; provided, however, that the Company's obligation pursuant to this Amendment shall fully and immediately terminate upon the earliest of (i) the Executive's death (except to assure that the appropriate death benefits under the New Policies with respect to which a Purchase Election has not been made are paid) or (ii) the Executive's termination for Cause (as defined in the Employment Agreement").

        9.    Rights.    Except as contemplated hereby, neither the Company nor the Trusts shall have the right to assign or convey any right or interest in any New Policy without the written consent of the other party. Neither the Company nor either of the Trusts shall have the right to take a loan against any New Policy without the written consent of the other party. Any and all dividends or distributions credited to any New Policy, and any and all interest and earnings in excess of expected and budgeted interest and earnings credited to any New Policy, shall be used for the exclusive purpose of reducing the Required Premium Payments and/or payments under the Annual Bonus Program for the exclusive benefit of the Company.

        10.    Integration.    This Amendment shall be deemed for all purposes as an amendment to the Employment Agreement, and any all interpretations of any provision of this Amendment shall be construed in accordance with, and any and all disputes arising hereunder shall be resolved in accordance with, the applicable provisions of the Employment Agreement.

        11.    Final Split-Dollar Regulations.    In the event that final United States Treasury regulations relating to split-dollar life insurance arrangements are published in the Federal Register prior to the Implementation Date, then, within 30 days of the date that such final regulations are published in the Federal Register, the Trusts (acting jointly) may terminate this Amendment and the Split Dollar Agreements by written notice to the Company. In the event of any such termination, the provisions of this Amendment shall thereafter be null and void, and the parties agree to use reasonable efforts to implement a lawful substitute for the arrangement provided for in this Amendment, which is fair and equitable to each of the parties and which provides a life insurance benefit substantially equivalent to the Insurance Entitlement.

        12.    Unlawfulness; Miscellaneous.    To the extent that the arrangement provided for in this Amendment is determined by the Company, a court of law or any regulatory agency to be unlawful, this Amendment and the Split Dollar Agreements shall terminate and the parties agree to use reasonable efforts to implement a lawful substitute for this arrangement, which is fair and equitable to each of the parties and which provides a life insurance benefit substantially equivalent to the Insurance Entitlement. This Amendment may be executed in counterparts, each of which will be deemed an original, but all of which will together constitute one and the same instrument.

5


        IN WITNESS WHEREOF, the parties have executed this Amendment to the Employment Agreement as of the date and year first above written.


 


 


CENDANT CORPORATION


 


 


By:


/s/  TERRY CONLEY      

 

 

 


 

 

 

Name:

Terry Conley

 

 

Title:

Executive Vice President
Human Resources


 


 


HENRY R. SILVERMAN

/s/  HENRY R. SILVERMAN      


 


 

 


 


 


 


HENRY R. SILVERMAN 1999 INSURANCE TRUST


 


 


By:


/s/  TRUSTEE      

 

 

 


 

 

 

Title:

Trustee


 


 


HENRY R. SILVERMAN 2000 INSURANCE TRUST


 


 


By:


/s/  TRUSTEE      

 

 

 


 

 

 

Title:

Trustee

6



Exhibit A1


ENDORSEMENT
and
BENEFICIARY DESIGNATION
[Name of Life Insurance Company]
Policy No.                     

        The death proceeds of the above policy shall be payable, in a lump sum, to CENDANT CORPORATION ("Cendant"), a Delaware corporation, with offices located at 9 West 57th Street, New York, New York 10019, the owner of such policy, to the extent of its interest under the Restated and Amended Split Dollar Agreement dated as of July 28, 2003 between MARTIN L. EDELMAN, as Trustee of the HENRY R. SILVERMAN [1999/2000] INSURANCE TRUST (the "Trust"), under agreement dated as of [August 10, 1999/August 23, 2000], with offices located at 75 East 55th Street, New York, New York 10022, and Cendant, a copy of which Agreement is annexed hereto. The balance of the death proceeds shall be payable, in a lump sum, to the Trust.

 

 

CENDANT CORPORATION


Dated: July    , 2003


 


By:


 

 

 

 


Name:
Title:



Exhibit A2


ENDORSEMENT
AND
BENEFICIARY DESIGNATION
[Name of Life Insurance Company]
Policy No.            

        The death proceeds of the above policy shall be payable, in a lump sum, to MARTIN L. EDELMAN, or to any successor to him, as Trustee of the HENRY R. SILVERMAN [1999/2000] INSURANCE TRUST (the "Trust"), under agreement dated as of [August 10, 1999/August 23, 2000], with offices located at 75 East 55th Street, New York, New York 10022, to the extent an interest in such policy has been endorsed to the Trust pursuant to the Restated and Amended Split Dollar Agreement dated as of July 28, 2003 between the Trust and the owner of such policy, CENDANT CORPORATION ("Cendant"), a Delaware corporation, with offices located at 9 West 57th Street, New York, New York 10019, a copy of which Agreement is annexed hereto. The balance of the death proceeds shall be payable, in a lump sum, to Cendant.


 


 


CENDANT CORPORATION


Dated: July    , 2003


 


By:


 

 

 

 


Name:
Title:



Exhibit B

Calendar Year


 

 

Required Premium Payments—
Pre-Purchase Election(1)


 

2003

 

4,566,909

2004

 

3,908,909

2005

 

3,775,909

2006

 

4,221,909

2007

 

3,564,000

2008

 

   584,988

2009

 

   584,988

2010

 

   584,988

2011

 

   584,988

2012

 

   584,988

2013

 

   584,988

2014

 

   584,988

2015

 

   584,988

2016

 

   584,988

2017

 

   584,988

2018

 

   584,988

2019

 

   584,988

2020

 

   584,988

2021

 

   584,988

2022

 

   584,988

        *****end of required Company contributions*****


(1)

The Company's obligation to make these Required Premium Payments shall cease with respect to any New Policy for which a Purchase Election is made. The Required Premium Payments represent premiums in respect of three separate New Policies, and in the event that a Purchase Election is made in respect of one or more but less than all such New Policies, then the Required Premium Payments shall be reduced based upon the premium cost applicable to the New Policy or New Policies in respect of which such Purchase Election is made. For purposes of calculating any such reduction to the Required Premium Payments, the premiums applicable to each such New Policy are set forth on Exhibit B1 hereto.



Exhibit B1

Required Premium Payments—Pre-Purchase Election

Calendar
Year


 

 

American
General


 

 

Pacific
Life


 

 

Mass
Mutual


 

 

Total Premiums


 


2003


 


2,154,322


 


1,896,384


 


516,203


 


4,566,909


2004


 


1,822,805


 


1,703,918


 


382,186


 


3,908,909


2005


 


1,757,254


 


1,665,431


 


353,224


 


3,775,909


2006


 


1,960,125


 


1,888,041


 


373,743


 


4,221,909


2007


 


2,750,000


 


500,000


 


314,000


 


3,564,000


2008


 


270,988


 


0


 


314,000


 


584,988


2009


 


270,988


 


0


 


314,000


 


584,988


2010


 


270,988


 


0


 


314,000


 


584,988


2011


 


270,988


 


0


 


314,000


 


584,988


2012


 


270,988


 


0


 


314,000


 


584,988


2013


 


270,988


 


0


 


314,000


 


584,988


2014


 


270,988


 


0


 


314,000


 


584,988


2015


 


270,988


 


0


 


314,000


 


584,988


2016


 


270,988


 


0


 


314,000


 


584,988


2017


 


270,988


 


0


 


314,000


 


584,988


2018


 


270,988


 


0


 


314,000


 


584,988


2019


 


270,988


 


0


 


314,000


 


584,988


2020


 


270,988


 


0


 


314,000


 


584,988


2021


 


270,988


 


0


 


314,000


 


584,988


2022


 


270,988


 


0


 


314,000


 


584,988


*****end of required Company contributions*****


 


 



Exhibit C2

Calendar Year


 

 

Annual Cash Bonus Program—Post-Purchase Election


 


2003


 


*            

2004

 

*            

2005

 

*            

2006

 

*            

2007

 

814,000

2008

 

584,988

2009

 

584,988

2010

 

584,988

2011

 

584,988

2012

 

584,988

2013

 

584,988

2014

 

584,988

2015

 

584,988

2016

 

584,988

2017

 

584,988

2018

 

584,988

2019

 

584,988

2020

 

584,988

2021

 

584,988

2022

 

584,988

        *****end of Annual Cash Bonus Program*****


2

This Exhibit C is not effective until following the exercise of a Purchase Election. Exhibit assumes for illustrative purposes than an exercise of a Purchase Election for each New Policy occurs in 2006. The Annual Bonus Program represents bonuses paid in respect of premiums under three separate New Policies, and in the event that a Purchase Election is made in respect of one or more but less than all such New Policies, then the Cash Bonus Payment shall be reduced based upon the premium cost applicable to the New Policy or New Policies in respect of which such Purchase Election has not been made. For purposes of calculating any such reduction to the Cash Bonus Payment, the premiums applicable to each such New Policy are set forth on Exhibit B1 hereto.


 


 

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SECOND AMENDMENT

TO AMENDED AND EXTENDED

EMPLOYMENT AGREEMENT

 

This Second Amendment (this "Amendment") to the Amended and Extended Employment Agreement, dated as of July 1, 2002 (the "Employment Agreement"), by and between Cendant Corporation (the "Company") and Henry R. Silverman (the "Executive") is hereby entered into by and between the Company and the Executive and shall become effective this 20th day of August, 2004, unless otherwise provided herein.

 

WHEREAS, the Company and the Executive entered into the Employment Agreement; and

 

WHEREAS, a First Amendment to the Employment Agreement (the "First Amendment") was entered into as of July 28, 2003, by and among the Company, the Executive and the Trustees of the Trusts (as defined in the First Amendment); and

 

WHEREAS, the Company and the Executive have agreed that the Employment Agreement, as amended by the First Amendment, shall be further amended as provided herein.

 

NOW, THEREFORE, in consideration of the foregoing and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Employment Agreement shall be amended as follows:

 

1.    Section 1 of the Employment Agreement shall be amended in its entirety to read as follows:

 

"1. TERM OF EMPLOYMENT. The employment of the Executive by the Company pursuant to this Agreement shall begin as of the Effective Date and shall end on December 31, 2007, subject to earlier termination as provided herein (the "Expiration Date") (such period from the Effective Date to the Expiration Date, the "Term")."

 

2.    Effective for fiscal year 2004 and each subsequent fiscal year of the Company during the Term, Section 4(e)(i)(B) of the Employment Agreement shall be amended in its entirety to read as follows:

 

 

 

 

 1

 


 

 

 

 

"(B) FOR FISCAL YEAR 2004 AND EACH FISCAL YEAR THEREAFTER

 

The Company shall pay to the Executive an Annual Formula Bonus for any particular fiscal year (or part thereof) during the Term equal to the sum of (1) plus (2), where:   

 

(1) equals the product of (I) sixty basis points (0.60%) multiplied by (II) the Company's Adjusted Pre-Tax Income (as defined below) for such fiscal year (or part thereof); PROVIDED, HOWEVER, that such product shall in no event exceed the product of (x) $100,000 multiplied by (y) each penny of the Company's Adjusted Diluted Earnings Per Share (as defined below) for such fiscal year (or part thereof); AND PROVIDED, FURTHER, HOWEVER, that such product shall in no event exceed an amount equal to 150% of Executive's annual base salary for such fiscal year (or part thereof); and where

 

(2) equals an amount determined pursuant to Exhibit 1 annexed hereto."

 

3.    Clause (A) of the definition of "Cause" contained in Section 6(a)(iii) of the Employment Agreement shall be amended in its entirety to read as follows:

 

"(A) the willful and continued failure by the Executive substantially to perform his duties hereunder (other than any such failure resulting from the Executive's incapacity due to physical or mental illness) or the Executive's gross negligence in the performance of his duties, in either case after written warning from the Board specifying in reasonable detail the breach(es) complained of;"

 

4.    Subclause (II) of Section 6(a)(v)(C) of the Employment Agreement shall be amended in its entirety to read as follows:

 

"(II) the present value (as of the date of such termination) of (x) the sum of future payments of the Executive's annual base salary (at the rate in effect immediately prior to such termination) from the date of termination through the end of the Termination Period (as hereinafter defined), as if the Executive had remained in employment, plus (y) the product of (1) the Annual Formula Bonus earned by Executive in respect of the fiscal year immediately prior to such termination, multiplied by (2) the lesser of (i) the number of years (including partial years) remaining in the Term (determined immediately prior to such termination) or (ii) 2.99 years (the period of time under this clause (2) shall be referred to as the "Termination Period" and the amounts payable to the Executive pursuant to the preceding subclauses (I) and (II) shall be referred to as the "Termination Payment").

 

 

 

 

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5.    The second sentence of Section 6(a)(v) of the Employment Agreement shall be deleted in its entirety and replaced with the following:

 

"For purposes of clause (x) of subclause (II) of the preceding sentence, each future payment of Executive's annual base salary shall be present valued to the date of termination at the rate of 5% per annum and for purposes of determining the present value of the product set forth in clause (y) of said subclause (II), each Annual Bonus Formula in respect of the Termination Period shall be present valued (at the rate of 5% per annum) from the date it would have been paid had Executive remained in employment."

 

6.    The phrase "for the remainder of his life", contained in clause (II) of the first sentence of Section 6(a)(vi)(A) of the Employment Agreement, shall be deleted and replaced with the phrase "for a period of five years".

 

7.    The following new sentence shall be added after the first sentence in Section 6(a)(vi)(A): "For the sake of clarity, the five year period described in the preceding sentence shall apply only to the monthly payments in respect of the Post Term Services and shall not apply to the Separation Benefits referred to in clauses (I) - (VI) set forth below in Section 6(a)(vi)(B)."

 

8.    The Employment Agreement shall be amended by adding Exhibit 1 annexed hereto as Exhibit 1 to the Employment Agreement.

 

 

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IN WITNESS WHEREOF, the parties have executed this Amendment to the Employment Agreement on the 20th day of August, 2004, to be effective as provided for herein.

 

 

 

 

CENDANT CORPORATION

 

 

 

 

 

 

By:

/s/ Terence P. Conley

 

 

Name: Terence P. Conley

 

 

Title:   Executive Vice President,

 

 

Human Resources and Corporate Services

 

 

 

 

 

 

HENRY R. SILVERMAN

 

 

 

 

 

/s/ Henry R. Silverman

 

 

 

 

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EXHIBIT 1

 

The aggregate bonus under this Exhibit 1 for a particular fiscal year shall consist of two components: the "current component" plus the "carryover component" (the carryover component shall only apply for purposes of computing bonuses for fiscal years 2005-2007).

 

A.    Current Component. The current component for a fiscal year shall be determined as follows:

 

If Average Growth*

in Adjusted Diluted

Earnings Per Share

as of end of Fiscal Year is

 

Then Current Component of Bonus for

such Fiscal Year

(expressed as % of Target Bonus**) shall be

 

 

 

Less than   8%

 

0    %

8%

 

16.67     %

9%

 

33.33     %

10%

 

50          %

11%

 

66.67     %

12%

 

83.33     %

13% or more

 

100        %

 

Straight-line interpolation shall be utilized for performance that falls between 8% and 13%.

 

 


*Average Growth as of the end of a particular fiscal year shall be determined as follows:

·    For 2004: average growth over 2001-2004.

·    For 2005: average growth over 2002-2005.

·    For 2006: average growth over 2003-2006.

·    2007: average growth over 2004-2007.

 

**Target Bonus for a fiscal year equals the excess of (A) over (B), where (A) equals the amount determined for the fiscal year under clause (1) of Section 4(e)(i)(B), but without regard to the cap of 150% of annual base salary (the "150% Cap"), and where (B) equals the amount determined under clause (1) of Section 4(e)(i)(B), taking into account the 150% Cap.

 

 

 

 


 

 

 

 

B.    Carryover Component. To the extent that the "current component" of the Executive's bonus under this Exhibit 1 for any or all of fiscal years 2004, 2005 and 2006 is less than 100% of the Target Bonus for the applicable fiscal year, then the dollar amount of such underage shall be carried over to the next subsequent fiscal year (and, to the extent not payable hereunder in such subsequent fiscal year, shall be further carried forward to subsequent fiscal years through and including fiscal year 2007) and shall become payable if the Average Growth* in Adjusted Diluted Earnings Per Share as of the end of any such subsequent fiscal year is 13% or more.

 

 

 

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AMENDMENT TO THE EMPLOYMENT AGREEMENT WITH HENRY R. SILVERMAN

Clarification of Employment Agreement

 

January 21 , 2005

 

 

Mr. Henry R. Silverman, Chairman and Chief Executive Officer

Cendant Corporation

9 West 57th Street

New York, New York 10019

 

Dear Mr. Silverman:

 

Reference is made to the Amended and Extended Employment Agreement by and between Cendant Corporation (“Cendant”) and you, dated as of July 1, 2002 (the “Employment Agreement”), and the Second Amendment to Amended and Extended Employment Agreement dated as of August 20, 2004 (the “Second Amendment”). Upon reviewing the Employment Agreement and the Second Amendment, we have discussed a certain provision which, for the benefit of Cendant and its shareholders, we mutually desire to clarify.

 

As you know, pursuant to the Second Amendment, you previously agreed that your entitlement to receive certain post-termination compensation under certain circumstances (in exchange for providing post-termination consulting services) would be reduced to a period which will not exceed 5 years (prior to the Second Amendment, the period was your lifetime). Cendant and you now wish to clarify that the post-termination restrictive covenants applicable to you under the Employment Agreement (which, for example, preclude you under certain circumstances from competing against Cendant for your lifetime) will not terminate if and when your right to post-termination compensation expires following such 5 year period. Rather, such post-termination restrictive covenants are intended to remain in effect for your lifetime or for as long as you are provided separation benefits from Cendant.

 

Therefore, for greater clarity and in order to effectuate the intent of the Second Amendment, Cendant and you agree that the second to last sentence of Section 8(c) of the Employment Agreement, which sets forth the definition of “Post Term Cessation Date,” is hereby amended to read, in its entirety, as follows:

 

 

“Post Term Cessation Date” shall mean the date that the Company ceases providing you Separation Benefits in breach of this Agreement.

 

This letter is intended to constitute an amendment to the Employment Agreement and, as amended hereby, the Employment Agreement shall remain in full force and effect. In order to evidence your agreement to the foregoing, please sign and return the enclosed copy of this document, which shall constitute a binding agreement between Cendant and you.

 

 

CENDANT CORPORATION

 

By: /s/ Eric J. Bock                

Eric J. Bock

Executive Vice President and Corporate Secretary

 

Accepted and Agreed to as

of the date first above written:

 

/s/ Henry R. Silverman    

Henry R. Silverman

 

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