Document:

M&F WORLDWIDE CORP. 

2008 LONG TERM INCENTIVE PLAN

AWARD AGREEMENT FOR PARTICIPATING EXECUTIVES OF 

[INSERT NAME OF BUSINESS

THIS AWARD AGREEMENT is made effective as of the __ day of _____, 2008, between M&F Worldwide Corp. (“M&F”), Harland Clarke Holdings Corp., a Delaware corporation (the “Company”), and _______ (the “Participant”). This Award Agreement is made to the Participant, who participates in the [name of business], which is one of the four Business Units. 

WHEREAS, M&F has adopted the M&F Worldwide Corp. 2008 Long Term Incentive Plan (the “Plan”) for, among other things, the purpose of providing certain key executives of the Company and its Affiliates a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company; and

WHEREAS, pursuant to the Plan, the Compensation Committee of the Board of Directors of M&F (the “Committee”) has determined to grant an award to the Participant subject to the terms, conditions and limitations provided herein and in the Plan (the “Award”).

NOW, THEREFORE, the parties hereto agree as follows:

1. Certain Definitions. As used in this Agreement, the following terms shall have the meanings as set forth below. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan:

(a) “Award Term” means the period beginning on January 1, 2008 and ending on December 31, 2010.

(b) “Business LTIP Bonus Pool “ shall have the meaning set forth in Section 3.

(c) “Business Unit” shall mean, as applicable one of the four Business Units: the Company, Harland Clarke Business, HFS, or Scantron.

(d) “Company Consolidated EBITDA” is one of the Performance Measures under this Agreement and shall mean for any fiscal year of the Company, consolidated net income for such fiscal year of the Company plus, without duplication and to the extent reflected as a charge in the statement of such consolidated net income for such fiscal year, the sum of (i) income tax expense, (ii) interest expense, amortization or write-off of debt discount and debt issuance costs and commissions (to the extent not already captured in interest expense), discounts and other fees and charges associated with indebtedness, (iii) depreciation and amortization expense (excluding amounts of prepaid incentives under customer contracts), (iv) any extraordinary non-cash expenses or losses, (v) any costs and expenses
incurred in connection with that certain merger of H Acquisition Corp., a subsidiary of M&F with and into John H. Harland Company, effective May 1, 2007 and reconstituted as Harland Clarke Corp. (the “Transaction”), (vi) allocation of fees charged by M&F or a subsidiary to the Company relating to the operation of the Company 

 

 

and (vii) all restructuring costs, in the case of clauses (i) through (vii) above, solely with respect to the Company and without duplication to any such items also charged to the Company’s subsidiaries, and minus (x) to the extent included in the statement of such consolidated net income for such period, the sum of (a) interest income, (b) any extraordinary or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such consolidated net income for such period, gains on the sales of assets outside of the ordinary course of business), and (c) income tax credits (to the extent not netted from income tax expense) and (y) any cash payments made during such period in respect of items described in clause (iv) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were reflected as a charge in the statement of consolidated net income, in the case of clauses (a) through (c) above, solely with
respect to the Company, all as determined on a consolidated basis, all of the foregoing to be determined by the Board or the Committee, as applicable. For the purposes of determining compensation milestones for any fiscal year, Company Consolidated EBITDA will be adjusted by the Board or the Committee, as applicable, as appropriate for material acquisitions or dispositions of any business or assets of or by the Company or its subsidiaries for such fiscal year and thereafter.

(e) “Consolidated LTIP Bonus Pool” shall have the meaning set forth in Section 3.

(f) “Cumulative Business Unit EBITDA” means the sum of the relevant Business Unit Consolidated EBITDA earned in each Fiscal Year during the Award Term.

(g) “Cumulative Consolidated EBITDA” means the sum of Company Consolidated EBITDA earned in each Fiscal Year during the Award Term.

(h) “Cumulative Harland Clarke Business EBITDA” means the sum of Harland Clarke Business Consolidated EBITDA earned in each Fiscal Year during the Award Term.

(i) “Cumulative HFS EBITDA” means the sum of HFS Consolidated EBITDA earned in each Fiscal Year during the Award Term.

(j) “Cumulative Scantron EBITDA” means the sum of Scantron Consolidated EBITDA earned in each Fiscal Year during the Award Term.

(k) “EBITDA” for purposes of this Agreement and the Plan shall be calculated in accordance with the definitions set forth in this Agreement provided that any target and actual EBITDA shall include funding for Payments under the Plan at, under or in excess of target Payments (i.e., Payments under the Plan will be self-funded by actual performance of the Company and the Business Units).

(l)  “Fiscal Year” means the fiscal year of the Company, which is the period January 1 through December 31.

(m) “Grant Date” means January 1, 2008, which is the date on which the Award is granted to the Participant.

 

 

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(n) “Harland Clarke Business” shall mean the business of the provision of checks and related products, direct marketing and other contact center services to financial and commercial institutions and individuals, and any future businesses from time to time included in or added to such businesses.

(o) “Harland Clarke Corp.” means Harland Clarke Corp., a Delaware corporation.

(p) “Harland Clarke Corp. Consolidated EBITDA” is one of the Performance Measures under this Agreement and shall mean for any fiscal year of Harland Clarke Corp., consolidated operating income for such fiscal year of the Harland Clarke Business plus, without duplication, the sum of (i) depreciation and amortization expense (excluding amounts of prepaid incentives under customer contracts), (ii) any extraordinary non-cash expenses or losses, (iii) any costs and expenses incurred in connection with the Transaction, (iv) allocation of fees charged by M&F or a subsidiary to Harland Clarke Corp. relating to the operation of the Harland Clarke Business and (v) all restructuring costs (as defined under U.S. generally accepted accounting principles), in the case of clauses (i) through (v) above,
solely with respect to the Harland Clarke Business, and minus (x) to the extent included in the statement of such consolidated net income for such period, the sum of any extraordinary or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such consolidated operating income for such period, gains on the sales of assets outside of the ordinary course of business), and (y) any cash payments made during such period in respect of items described in clause (ii) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were reflected as a charge in the statement of consolidated operating income, in the case of clauses (x) and (y) above, solely with respect to the Harland Clarke Business, all as determined on a consolidated basis, all of the foregoing to be determined by the Board or the Committee, as applicable. For the purposes of determining compensation milestones for any fiscal year, Harland
Clarke Corp. Consolidated EBITDA will be adjusted by the Board or the Committee, as applicable, as appropriate for material acquisitions or dispositions of any business or assets of or by the Harland Clarke Business or its subsidiaries for such fiscal year and thereafter.

(q) “HFS” means Harland Financial Solutions, Inc., an Oregon corporation.

(r) “HFS Consolidated EBITDA” is one of the Performance Measures under this Agreement and shall mean for any fiscal year of HFS, consolidated operating income for such fiscal year of HFS plus, without duplication, the sum of (i) depreciation and amortization expense (excluding amounts of prepaid incentives under customer contracts), (ii) any extraordinary non-cash expenses or losses, and (iii) allocation of fees charged by M&F or a subsidiary to HFS relating to the operation of HFS, (iv) all restructuring costs, in the case of clauses (i) through (iv) above, solely with respect to HFS and minus (x) to the extent included in the statement of such consolidated net income for such period, the sum of any extraordinary or non-recurring income or gains (including, whether or not otherwise
includable as a separate item in the statement of such consolidated operating income for such period, gains on the sales of assets outside of the ordinary course of business), and (y) any cash payments made during such period in respect of items described in clause (ii) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were reflected as a charge in the statement of consolidated operating income, all as determined on a consolidated basis, all of the foregoing to

 

 

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be determined by the Board or the Committee, as applicable. For the purposes of determining compensation milestones for any fiscal year, HFS Consolidated EBITDA will be adjusted by the Board or the Committee, as applicable, as appropriate for material acquisitions or dispositions of any business or assets of or by HFS or its subsidiaries for such fiscal year and thereafter.

(s) “Payout” means the amount determined under Section 3.

(t) “Scantron” means Scantron Corporation, a Delaware corporation.

(u) “Scantron Consolidated EBITDA” is one of the Performance Measures under this Agreement and shall mean for any fiscal year of Scantron, consolidated operating income for such fiscal year of Scantron plus, without duplication, the sum of (i) depreciation and amortization expense (excluding amounts of prepaid incentives under customer contracts), (ii) any extraordinary non-cash expenses or losses, and (iii) allocation of fees charged by M&F or a subsidiary to Scantron relating to the operation of Scantron, (iv) all restructuring costs, in the case of clauses (i) through (iv) above, solely with respect to Scantron and minus (x) to the extent included in the statement of such consolidated net income for such period, the sum of any extraordinary or non-recurring income or gains (including,
whether or not otherwise includable as a separate item in the statement of such consolidated operating income for such period, gains on the sales of assets outside of the ordinary course of business), and (y) any cash payments made during such period in respect of items described in clause (ii) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were reflected as a charge in the statement of consolidated operating income, all as determined on a consolidated basis, all of the foregoing to be determined by the Board or the Committee, as applicable. For the purposes of determining compensation milestones for any fiscal year, Scantron Consolidated EBITDA will be adjusted by the Board or the Committee, as applicable, as appropriate for material acquisitions or dispositions of any business or assets of or by Scantron or its subsidiaries for such fiscal year and thereafter. 

(v)  “Target Business Unit EBITDA” shall, with respect to each Fiscal Year, mean the target Business Unit EBITDA for the respective Business Unit for the Business Unit covered by this Agreement as established annually by the Committee.

(w)  “Target Consolidated EBITDA” shall, with respect to each Fiscal Year, mean the target Company Consolidated EBITDA, as established annually by the Committee.

(x) “Target Cumulative Business Unit EBITDA” shall mean the sum of Target Business Unit EBITDA for each Fiscal Year during the Award Term.

(y) “Target Cumulative EBITDA” shall mean the sum of Target Consolidated EBITDA for each Fiscal Year during the Award Term.

(z) “Vesting Date” shall mean December 31, 2010.

 

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2. Grant of Award. 

(a) Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Participant’s percentage of the Business LTIP Bonus Pool for the Award Term shall be __% (the “Business Payment Value”) and for the Consolidated Business LTIP Pool shall be __%  (the “Consolidated Payment Value”), and the Business Payment Value shall be applied to the Excess Business LTIP Bonus Pool (as defined in Section 3(c)) and the Consolidated Payment Value shall be applied to the Excess Consolidated LTIP Bonus Pool (as defined in Section 3(e)). The LTIP Bonus Pool shall be determined in the manner set forth in Section 3.

(b) This Agreement shall be construed in accordance with, and subject to, the terms of the Plan (the provisions of which are incorporated herein by reference); provided, that, in the event of any inconsistency between the terms of the Plan and this Agreement, the terms of this Agreement shall govern.

(c) The Committee shall annually establish the Target Business Unit EBITDA and Target Consolidated EBITDA for each of Fiscal Years 2008, 2009 and 2010 and such amounts shall be communicated to the Participant.

3. Determination of Payout. 

(a) The Business LTIP Bonus Pool for the Award Term (the “Business LTIP Bonus Pool”) shall be $4,500,000 ($4,500,000/3 per each Fiscal Year) and the Consolidated Business LTIP Pool for the Award Term (the “Consolidated LTIP Bonus Pool”) shall be $8,850,000 ($8,850,000/3 per each Fiscal Year), each as adjusted below. As soon as practicable after the end of the Award Term, the Committee shall determine the total amount of Cumulative Business EBITDA and Cumulative Consolidated EBITDA earned by the Company during the Award Term.              

(b) If upon completion of the Award Term, the Cumulative Business Unit EBITDA achieved is less than 90% of the Target Cumulative Business Unit EBITDA, then the Business LTIP Bonus Pool shall be reduced to zero and no payout will be made in respect thereof. If Cumulative Business Unit EBITDA is between 90% to 100% of Target Cumulative Business Unit EBITDA, then the Participant’s Business Payment Value shall be linearly interpolated on a straight line basis between 50% to 100% of the Business Payment Value with respect to the Business LTIP Bonus Pool, as set forth in the table below: 

 

	
                        Cumulative Business Unit EBITDA achieved as %
 of Target Cumulative Business Unit EBITDA
 	 	
                        % of Payment Value
 
	
                        <90
 	 	
                        0%
 
	
                        90
 	 	
                        50%
 
	
                        91
 	 	
                        55%
 
	
                        92
 	 	
                        60%
 
	
                        93
 	 	
                        65%
 
	
                        94
 	 	
                        70%
 
	
                        95
 	 	
                        75%
 
	
                        96
 	 	
                        80%
 
	
                        97
 	 	
                        85%
 
	
                        98
 	 	
                        90%
 
	
                        99
 	 	
                        95%
 
	
                        100
 	 	
                        100%
 

 

 

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(c) If upon completion of the Award Term, Cumulative Business Unit EBITDA achieved is more than Target Cumulative Business Unit EBITDA, then, in addition to the Business Payment Value earned at Target Cumulative Business Unit EBITDA, the Participant shall be entitled to receive an amount equal to the Business Payment Value applied to the “Excess Business LTIP Bonus Pool”. The “Excess Business LTIP Bonus Pool” means 2.3% of the excess of Cumulative Business Unit EBITDA achieved above Target Cumulative Business Unit EBITDA, up until the achievement of 120% of Target Cumulative Business Unit EBITDA. For the avoidance of doubt, the Excess Business LTIP Bonus Pool shall not be increased for achievement of Cumulative Business Unit EBITDA in excess of 120% of Target Cumulative Business Unit EBITDA.

(d) If upon completion of the Award Term, the Cumulative Consolidated EBITDA achieved is less than 90% of the Target Cumulative EBITDA, then the Consolidated LTIP Bonus Pool shall be reduced to zero and no payout will be made. If Cumulative Consolidated EBITDA is between 90% to 100% of Target Cumulative EBITDA, then the Participant’s Consolidated Payment Value shall be linearly interpolated on a straight line basis between 50% to 100% of the Consolidated Payment Value with respect to the Consolidated LTIP Bonus Pool, as set forth in the table below: 

 

	
                        Cumulative Consolidated EBITDA as %
 of Target Cumulative EBITDA
 	 	
                        % of Payment Value
 
	
                        <90
 	 	
                        0%
 
	
                        90
 	 	
                        50%
 
	
                        91
 	 	
                        55%
 
	
                        92
 	 	
                        60%
 
	
                        93
 	 	
                        65%
 
	
                        94
 	 	
                        70%
 
	
                        95
 	 	
                        75%
 
	
                        96
 	 	
                        80%
 
	
                        97
 	 	
                        85%
 
	
                        98
 	 	
                        90%
 
	
                        99
 	 	
                        95%
 
	
                        100
 	 	
                        100%
 

 

 

6

 

(e) If upon completion of the Award Term, Cumulative Consolidated EBITDA is more than Target Cumulative EBITDA, then, in addition to the Consolidated Payment Value earned at Target Cumulative EBITDA, the Participant shall be entitled to receive an amount equal to the Consolidated Payment Value applied to the “Excess Consolidated LTIP Bonus Pool”. The “Excess Consolidated LTIP Bonus Pool” means 2.7% of Cumulative Consolidated EBITDA above Target Cumulative EBITDA, up until the achievement of 120% of Target Cumulative EBITDA. For the avoidance of doubt, the Excess Consolidated LTIP Bonus Pool shall not be increased for achievement of Cumulative Consolidated EBITDA in excess of 120% of Target Cumulative EBITDA. 

The formula described in this Section shall be the Performance Goals under this Agreement. Subject to the vesting and termination of employment provisions set forth in Sections 4 and 5, the Participant shall be entitled to a payment equal to the sum of (i) his or her Business Payment Value multiplied by the Business LTIP Bonus Pool and (ii) his or her Consolidated Payment Value multiplied by the Consolidated LTIP Bonus Pool, in each case as may by increased by Section 3(c) and/or Section 3(e)  (such amount is collectively referred to as the “Payout”). Notwithstanding anything in this Award or the Plan to the contrary, the reduction in a Participant’s Payment Value shall not result in the increase of any other Participant’s Award.

4. Vesting; Payment of Payout.

(a) Except as set forth in Section 5, the Payout shall vest on the Vesting Date, provided that the Participant is employed with the Company on such date.

(b) The Payout shall be paid on or about the date that is two and a half months from the Vesting Date (the date of such Payout, the “Payout Date”). 

(c) The Payout shall be paid by the Company in cash.

5. Termination of Employment.

(a) Except as provided below, the Payout shall be forfeited upon a termination of employment or voluntary resignation from employment for any reason prior to the Vesting Date. The Payout shall also be forfeited if the Participant is terminated by the Company for Cause after the Vesting Date but prior to the Payout Date.

(b) Upon a termination of employment by the Company other than for Cause prior to the Payout Date, the Participant shall be entitled to receive on the Payout Date a payment equal to the lesser of (i) the actual Payout on the Payout Date had the Participant remained employed through the Vesting Date and (ii) the Participant’s Payment Value based on the LTIP Bonus Pool (without regard to increases to the LTIP Bonus Pool) multiplied by a fraction, the numerator of which is the number of days from January 1, 2008 through the earlier of (x) the end of the Award Term and (y) the date on which the Participant’s employment is terminated and the denominator of which is the number of days in the Award Term.

(c) Upon a termination of employment by reason of the Participant’s death or by the Company due to Disability prior to the Payout Date, the Participant (or the Participant’s estate, as

 

 

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applicable) shall be entitled to receive on the Payout Date a payment equal to the Payout multiplied by a fraction, the numerator of which is the number of days from January 1, 2008  through the earlier of (x) the end of the Award Term and (y) the date on which the Participant’s employment is terminated and the denominator of which is the number of days in the Award Term.

6. Protection of Confidential Information; Restrictive Covenants. 

(a) During the period of the Participant’s continued employment with the Company or its Affiliates, the Company and/or its Affiliates will share with the Participant confidential and trade secret information regarding not only the Company but also its subsidiaries and Affiliates. In view of the fact that the Participant’s work for the Company will bring the Participant into close contact with many confidential affairs of the Company not readily available to the public, trade secret information and plans for future developments, the Participant agrees:

	
                         
 	
                        1.
 	
                        To keep and retain in the strictest confidence all confidential matters of the Company, M&F or its Affiliates, including, without limitation, “know how”, trade secrets, customer lists, pricing policies, operational methods, technical processes, formulae, inventions and research projects, other business affairs of the Company, M&F or its Affiliates, and any information whatsoever concerning any director, officer, employee, shareholder, partner, customer or agent of the Company, M&F or its Affiliates, or their respective family members learned by the Participant heretofore or hereafter, and not to disclose them to anyone outside of the Company, M&F or its Affiliates, either during or after the Participant’s employment with the Company, except in the course of performing the Participant’s duties hereunder or with the
Company’s express written consent. The foregoing prohibitions shall include, without limitation, directly or indirectly publishing (or causing, participating in, assisting or providing any statement, opinion or information in connection with the publication of) any diary, memoir, letter, story, photograph, interview, article, essay, account or description (whether fictionalized or not) concerning any of the foregoing, publication being deemed to include any presentation or reproduction of any written, verbal or visual material in any communication medium, including any book, magazine, newspaper, theatrical production or movie, or television or radio programming or commercial; and
 

	
                         
 	
                        2.
 	
                        To deliver promptly to the Company on termination of the Participant’s employment by the Company or its Affiliates, or at any time the Company may so request, all memoranda, notes, records, reports, manuals, drawings, blueprints and other documents (and all copies thereof), including data stored in computer memories or on other media used for electronic storage or retrieval, relating to the Company’s business and all property associated therewith, which the Participant may then possess or have under the Participant’s control, and not retain any copies, notes or summaries.
 

 

 

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(b)  In support of the Participant’s commitments to maintain the confidentiality of the Company’s and M&F or its Affiliates’ confidential and trade secret information, during (i) the Participant’s continued employment with the Company or its Affiliates, and (ii) for a period of two years following termination of the Participant’s employment for any reason, the Participant shall not in the United States and in any non-US jurisdiction where the Company, M&F or its Affiliates may then do business: (a) directly or indirectly, enter the employ of, or render any services to, any person, firm or corporation engaged in any business competitive with the business of the Company, M&F or its Affiliates; (b) engage in such business on the Participant’s own account; and the Participant shall not become interested in any such business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any other relationship or capacity; (c) directly or indirectly, solicit, encourage or cause any client, customer or supplier of the Company, M&F or its Affiliates to cease doing business with the Company, M&F or its Affiliates or to reduce the amount of business such client,
customer or supplier does with the Company, M&F]or its Affiliates or (d) directly or indirectly, solicit or encourage to cease to work with the Company, M&F or its Affiliates or directly or indirectly hire, any person who is an employee of or consultant then under contract with the Company, M&F or its Affiliates or who was an employee of or consultant then under contract with the Company, M&F or its Affiliates within the six month period preceding such activity without the Company’s, M&F or its Affiliates’ written consent.

(c) If the Participant commits a breach, or threatens to commit a breach, of any of the provisions of Sections 6(a) or 6(b) hereof, the Company, M&F and its Affiliates shall have the following rights and remedies:

	
                         
 	
                        1.
 	
                        The right and remedy to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company, M&F or its Affiliates and that money damages will not provide an adequate remedy to the Company M&F and its Affiliates;
 

	
                         
 	
                        2.
 	
                        The right and remedy to require the Participant to account for and pay over to the Company or M&F and its Affiliates all compensation, profits, monies, accruals, increments or other benefits derived or received by the Participant as the result of any transactions constituting a breach of any of the provisions of the preceding paragraph, and the Participant hereby agrees to account for and pay over such benefits to the Company or M&F and its Affiliates. Each of the rights and remedies enumerated above shall be independent of the other, and shall be severally enforceable, and all of such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company or M&F and its Affiliates under law or in equity; and
 

 

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                        3.
 	
                        if such breach is discovered after the Participant has received the Payout, the Participant will be required to return such Payout to the Company; and
 

	
                         
 	
                        4.
 	
                        the right and remedy to require the Participant to pay the Company and M&F or its Affiliates all damages, losses, costs or expenses incurred by the Company M&F and its Affiliates as a result of any action constituting a breach of threatened breach of Sections 6(a) and 6(b) hereof
 

Except as otherwise provided herein, no remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, and each and every remedy shall be cumulative and shall be in addition to every remedy under this Section 6(c) now or hereafter existing at law or in equity or by statue.

(d) If any of the covenants contained in Sections 6(a) or 6(b), or any part thereof, hereafter are held by a court to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to those portions found invalid.

(e) If any of the covenants contained in Sections 6(a) or 6(b), or any part thereof, are held to be unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and, in its reduced form, said provision shall then be enforceable.

(f) The Participant agrees (whether during or after the Participant’s employment with the Company) not to issue, circulate, publish or utter any false or disparaging statements, remarks or rumors about the Company, M&F or its Affiliates or the officers, directors, managers, customers, partners, or shareholders of the Company, M&F or its Affiliates unless giving truthful testimony under subpoena.

7. Tax Withholding. The Participant agrees to make appropriate arrangements with the Company for satisfaction of any applicable federal, state or local tax withholding requirements, and the Company shall have the right to withhold from the Payout or from any other compensation owing to the Participant such amount as may be necessary in the opinion of the Company to satisfy all such taxes.

8. No Right to Employment. Neither the Plan nor this Agreement shall confer on the Participant any right to continued employment with the Company, M&F or its Affiliates. 

9. Modification of Agreement. Except as set forth in the Plan and herein, this Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto.

 

 

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10. Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force and effect in accordance with their terms. 

11. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware, without regard to its conflict of laws principle. 

12. Successors in Interest. This Agreement shall inure to the benefit of and be binding upon any successor to the Company and M&F. This Agreement shall inure to the benefit of the Participant’s heirs, executors, administrators and successors. All obligations imposed upon the Participant and all rights granted to the Company and M&F under this Agreement shall be binding upon the Participant’s heirs, executors, administrators and successors.

13. Entire Agreement. This Agreement, together with the Plan, constitutes the entire agreement between the parties with respect to the subject matter hereof and the parties acknowledge and agree that the Award provided for herein is in lieu and full satisfaction of the Company’s obligations pursuant to any employment agreement with the Company or any of its Affiliates. 

 

 

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed as of the date first above written.

 

	
                        M & F WORLDWIDE CORP.
 	
                         
 	
                         
 
	
                        

                        By: 
 	
                          
 	
                         
 	
                         
 	
                         
 
	
                        Name: 
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                        Title:
 	
                         
 	
                         
 	
                         
 	
                         
 

 

	
                        HARLAND CLARKE HOLDINGS CORP.
 	
                         
 	
                         
 
	
                        

                        By: 
 	
                          
 	
                         
 	
                         
 	
                         
 
	
                        Name: 
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                        Title:
 	
                         
 	
                         
 	
                         
 	
                         
 

 

	
                        PARTICIPANT:
 	
                         
 	
                         
 
	
                        

                        By: 
 	
                          
 	
                         
 	
                         
 	
                         
 
	
                        Name: 
 	
                         
 	
                         
 	
                         
 	
                         
 

 

 

12exv10w6

 

Exhibit 10.6

January 3, 2007

Mr. James Gray

769 Greenwood Avenue

Glencoe, Illinois 60022

	 	 	 	 	 	 	 
	 

	 	Re:
	 	Amended and Restated Retention
Letter Agreement	 	 

Dear Jim:

     In keeping with our discussions, this letter agreement memorializes the terms of your
continued retention by optionsXpress Holdings, Inc. (the “Company”). This letter amends and
restates that certain Retention Letter Agreement, dated as of January 5, 2005, which shall continue
is full force and effect from the date hereof as amended hereby.

     1. Titles and Duties. Your title will be Chairman of the Board, and you will report
directly to the Board of Directors of the Company (the “Board”). As such, you will be responsible
for performing such duties and responsibilities as are customarily assigned to such position, and
to perform such other services as assigned from time to time by the Board, not inconsistent with
your position. You will be expected to devote such business time and attention to the business of
the Company as you deem appropriate for your position as Chairman of the Board and acting as such
in a non-executive capacity.

     2. Compensation; Term. You will receive an annual retainer of $300,000 (the “Base
Remuneration”) paid in accordance with the payroll procedures of the Company, with annual increases
(but not decreases) as may be determined by the Compensation Committee of the Board in its
discretion. The Remuneration payable hereunder, as may be increased from time to time, and any
other amounts payable to you under this Agreement (including, without limitation, pursuant to
Section 3 and Section 4 below), shall be subject to applicable withholding and payroll taxes, if
any, and such other deductions as may be required under the Company’s employee benefit plans. The
term of your retention under this letter agreement shall begin on the date hereof and shall
continue until terminated in accordance with Section 5 below.

     3. Benefits. None.

     4. Termination and Severance.

          (a) During the term of retention hereunder, your retention may be terminated as
follows:

	 	 (i)	 	At any time upon prior written notice by the Company for any
reason other than Cause (as defined below) or no reason (“Termination Without
Cause”).

 

 

January 3, 2007

Mr. James Gray

Page 2

	 	 (ii)	 	At any time upon three (3) months prior written notice by you
for any reason other than Good Reason (as defined below) or no reason.
	 
	 	 (iii)	 	Automatically in the event of (A) your death or (B) your
inability to perform the essential duties, responsibilities and functions of
your position with the Company as a result of any mental or physical
incapacity, even with reasonable accommodations for such disability or
incapacity provided by the Company, which inability lasts (or is likely to
last, based on competent medical evidence presented to the Board) for a
continuous period of six (6) months or longer. The reasoned and good faith
judgment of the Board as to your mental or physical inability to perform shall
be final so long as such judgment is based on competent medical evidence
presented to the Board by you and by any physician or group of physicians
engaged by you or the Board to advise the Board on such matters.
	 
	 	 (iv)	 	Immediately upon written notice by the Company if such
termination is for Cause (“Termination for Cause”).
	 
	 	 (v)	 	Immediately upon written notice by you if such termination is
for Good Reason.
	 
	 	 (vi)	 	At any time by mutual written agreement between you and the
Company.

          (b) Upon termination of your retention hereunder for any reason, all obligations of the
Company shall cease upon such termination, except the Company’s obligations to (i) pay the
compensation set forth in Section 2 hereof through the date of such termination, (ii) pay
the severance benefits, if applicable, to you pursuant to the terms and conditions set forth
in Section 5(c) below. In the event that your retention is terminated by you without Good
Reason or as a result of a Termination for Cause by the Company, you shall not be entitled
to any bonus compensation in respect of the calendar year of your termination.

          (c) In the event that your retention is terminated for Good Reason or as a result of a
Termination Without Cause, you shall be entitled to receive an amount equal to twelve (12)
months severance pay at the monthly rate of your then-current Base Remuneration, payable in
twelve (12) equal monthly installments following such termination, unless increased pursuant
to the terms of Section 5(f) below, if and only if (i) you have executed and delivered to
the Company a mutual general release of all claims against you, on the one hand, and the
Company and its other directors, officers and affiliates, on the other hand, which general
release shall be in the form of Exhibit A attached hereto, and (ii) subsequent to
such termination, you shall not have (A) revoked or breached the provisions of such general
release or breached or otherwise failed to comply with the provisions of Sections 6, 7 or 8
of this letter agreement, or (B) applied for unemployment compensation chargeable to the
Company during such severance period.

 

 

January 3, 2007

Mr. James Gray

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          (d) For purposes hereof, the term “Cause” means the following: (i) the commission of
fraud, theft or embezzlement by you in connection with your duties to the Company or any of
its customers or other material business relations; (ii) your conviction of (or entry of a
plea of guilty or nolo contendere to) a felony (other than minor traffic
violations) (A) in connection with your duties to the Company or any of its customers or
other material business relations, or (B) that materially and adversely effects your ability
to continue in your position and fulfill your duties to the Company under applicable laws
and regulations; (iii) your gross mismanagement demonstrably and materially injurious to the
Company, which is not cured within thirty (30) days after a written demand is delivered to
you by the Board which identifies the grounds therefor; (iv) any material breach by you of
the provisions of this letter agreement (including any breach by you of the provisions set
forth in Sections 6, 7 or 8 hereof) or any other material breach of any other agreement
between or among you and the Company, in either event which breach has not been cured within
thirty (30) days after a written demand is delivered to you by the Board which identifies
the grounds therefor. Any disagreement concerning whether there has been “Cause” for
termination will be resolved by the Board in its sole discretion acting in good faith after
providing you an opportunity to address the Board at a full meeting thereof regarding
whether or not there has been “Cause” for termination.

          (e) For purposes hereof, the term “Good Reason” means your termination of retention by
the Company as a result of the following: (i) a material adverse alteration in the nature or
status of your position, duties or responsibilities with the Company without your prior
written consent; or (ii) the failure of the Company to comply in any material respect with
any of its obligations hereunder or under any other agreements with you which remains
uncured for a period of thirty (30) days following your written notice to the Company of
such failure.

          (f) In the event your retention with the Company is terminated for any reason, the
Company shall have the option to elect in writing within sixty (60) days after the date of
termination to pay you, in equal monthly installments, an additional amount equal to your
then-current retainer for up to twenty-four (24) additional months following the
Noncompetition Period, with any such additional period being referred to herein as the
“Additional Restriction Period” (which amount shall be in addition to any other amounts
payable to you under Section 5(c) hereof). If the Company makes such election then the
restrictions contained in Sections 7(a) and (b) hereof shall commence on the date of such
termination and extend for the Additional Restriction Period. In the event the Company fails
to make such election in the manner and during the time period set forth above, then the
Company shall be deemed to have waived its rights to make an election under this Section
5(f).

     5. Confidentiality.

          (a) You will not at any time during or after termination of your retention with the
Company disclose to anyone or make use of, directly or indirectly, any Confidential
Information (as defined below). All records of every nature and description relating to the

 

 

January 3, 2007

Mr. James Gray

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Company’s business during your retention, whether or not prepared by you, shall be and
remain the property of the Company. All records of every nature and description relating to
the Company’s business during your retention shall be left with or delivered to the Company
upon termination of your retention.

          (b) For purposes of this letter agreement, “Confidential Information” means all
information of a confidential or proprietary nature (whether or not specifically labeled or
identified as “confidential”), in any form or medium, that relates to the Company or its
subsidiaries or their business relations and their respective business activities and
includes, without limitation, the following: (i) internal business information (including
historical and projected financial information and budgets and information relating to
strategic and staffing plans and practices, business, training, marketing, promotional and
sales plans and practices, cost, rate and pricing structures and accounting and business
methods); (ii) identities and individual requirements of, and specific contractual
arrangements with, the Company’s and its subsidiaries’ customers, employees, independent
contractors, clearing agencies, joint venture partners and other business relations and
their confidential information; (iii) trade secrets, know-how, compilations of data and
analyses, techniques, systems, formulae, research, records, reports, manuals, documentation,
models, data and data bases relating thereto; (iv) inventions, innovations, improvements,
developments, methods, designs, analyses, drawings, reports and all similar or related
information (whether or not patentable); and (v) information related to any and all
intellectual and proprietary property and rights and rights in Confidential Information of
every kind and description anywhere in the world, including all (A) patents, patent
applications, patent disclosures and inventions, (B) internet domain names, trademarks,
service marks, trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill associated
therewith, (C) copyrights (registered or unregistered) and copyrightable works and
registrations and applications for registration thereof, (D) mask works and registrations
and applications for registration thereof, (E) computer software, data, data bases and
documentation thereof, (F) trade secrets and other Confidential Information (including
ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or
not reduced to practice), know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and customer and supplier
lists and information), (G) other intellectual property rights and (H) copies and tangible
embodiments thereof (in whatever form or medium).

          (c) Notwithstanding the provisions of this Section 6, information shall not be deemed
“Confidential Information” for purposes hereof if such information is (i) in the public
domain (other than as a result of a breach of this Agreement by you), (ii) approved for
release by the Company or (iii) lawfully obtained by you after termination of your retention
with the Company from third parties (other than the Company or any of its affiliates or any
of their respective employees, directors or representatives) on a

 

 

January 3, 2007

Mr. James Gray

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nonconfidential basis who, to your knowledge, are not prohibited from disclosing such
information to you by a legal, contractual or fiduciary obligation to the Company or any of
its affiliates.

     6. Noncompetition; Nonsolicitation.

          (a) You acknowledge that (i) you are one of the Company’s founders and that you are
familiar with the Company’s trade secrets and with other confidential information concerning
the Company, including the Company’s (A) inventions, technology and research and
development, (B) customers and vendors and customer and vendor lists, (C) products and
services (including those under development) and related costs and pricing structures, (D)
accounting and business methods and practices, and (E) similar and related confidential
information and trade secrets; (ii) your services have been and shall continue to be of
special, unique and extraordinary value to the Company and that you have been substantially
responsible for the growth and development of the Company and the creation and preservation
of the Company’s goodwill; and (iii) the Company would be irreparably damaged (including a
significant loss of goodwill) if you were to provide similar services to any person or
entity competing with the Company or engaged in a similar business. The term of your
retention with the Company and a period of one (1) year after termination of your retention
as provided hereunder (the “Noncompetition Period”), unless such one (1) year period is
extended pursuant to the provisions of Section 5(f) above, you shall not directly or
indirectly, either for yourself or for any other individual, corporation, partnership, joint
venture or other entity, own any interest in, manage, control, participate in (whether as an
officer, director, employee, partner, agent, representative or otherwise), consult with or
render services for any entity that (in whole or in part) engages or proposes to engage in,
or in any other manner engage, anywhere in the world, in the on-line securities industry for
the retail, consumer customer base (including, for the avoidance of doubt and without
limitation, the service of retail brokerage accounts through independent representatives) or
any other business conducted by the Company or any of its subsidiaries during your retention
term or proposed to be conducted by the Company or any of its subsidiaries within the six
(6) month period prior to the termination of your retention; provided,
however, that nothing herein shall prohibit you from being a passive owner of not
more than ten percent (10%) of the outstanding stock of any class of a corporation which is
publicly traded so long as you do not have any active participation in the business of such
corporation; and, provided further, that you shall not be deemed to have violated
the provisions of this Section 7(a) as a result of any ordinary course trading, investment
or other business activities taken by or on behalf of G-Bar Limited Partnership and its
affiliates in connection with their respective businesses so long as no significant portion
of such ordinary course trading, investment or other business activities are in direct
competition with the business of the Company or any of its subsidiaries relating to the
service of retail consumer customers or the service of retail brokerage accounts through
independent representatives.

 

 

January 3, 2007

Mr. James Gray

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          (b) During the Noncompetition Period, you shall not directly or indirectly (through any
other individual, corporation, partnership, joint venture or other entity or otherwise) (i)
induce or attempt to induce any employee of the Company or any of its subsidiaries to leave
the employ of the Company or any of its subsidiaries, or in any way interfere with the
relationship between the Company or any of its subsidiaries and any employee thereof, (ii)
hire any person who was an employee of the Company or any of its subsidiaries at any time
during the six (6) month period immediately prior to the date on which such hiring would
take place, or (iii) call on, solicit or service any customer, supplier, licensee, licensor
or other business relation of the Company or any of its subsidiaries in order to induce or
attempt to induce such person to cease doing business with the Company or any of its
subsidiaries, or in any way interfere with the relationship between any such customer,
supplier, licensee or business relation and the Company or any of its subsidiaries. Each of
you and the Company (on behalf of itself and its subsidiaries) mutually agree not to make
any negative statements or communications about the other and, in the case of the Company,
about any of its subsidiaries.

          (c) If, at the time of enforcement of the covenants contained in this Section 7 (the
“Restrictive Covenants”), a court shall hold that the duration, scope or area restrictions
stated herein are unreasonable under circumstances then existing, you agree that the maximum
duration, scope or area reasonable under such circumstances shall be substituted for the
stated duration, scope or area and that the court shall be allowed and directed to revise
the restrictions contained herein to cover the maximum period, scope and area permitted by
law. You acknowledge that you have consulted with legal counsel regarding the Restrictive
Covenants and, based on such consultation, have determined and hereby acknowledge that the
Restrictive Covenants are reasonable in terms of duration, scope and area restrictions and
are necessary to protect the goodwill of the Company’s business and the on-line nature of
the Company’s business is such that it is not conducted with respect to geographical
boundaries.

          (d) If you breach, or threaten to commit a breach of, any of the Restrictive Covenants,
the Company shall have the right and remedy to have the Restrictive Covenants specifically
enforced by any court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury to the Company
and that money damages would not provide an adequate remedy to the Company.

          (e) In the event of any breach or violation by you of any of the Restrictive Covenants,
the time period of such covenant shall be tolled until such breach or violation is resolved.

     7. The Company’s Ownership of Intellectual Property.

          (a) In the event that you, as part of your activities on behalf of the Company or any
of its subsidiaries generate, author or contribute to (whether before or after the date of
this letter agreement) any invention, design, new product or service development,

 

 

January 3, 2007

Mr. James Gray

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device, product, method or process (whether or not patentable or reduced to practice or
comprising Confidential Information), any copyrightable work (whether or not comprising
Confidential Information) or any other form of Confidential Information relating directly or
indirectly to the Company’s or any of its subsidiaries’ business as now or hereinafter
conducted (the “Intellectual Property”), you acknowledge that such Intellectual Property is
the exclusive property of the Company and hereby assign all right, title and interest in and
to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in
part by you will be deemed “a work made for hire” under Section 201(b) of the 1976 Copyright
Act, and the Company shall own all of the rights comprised in the copyright therein. You
shall promptly and fully disclose to the Company all Intellectual Property not generally
known to the Company through the ordinary course of operation of the business, and you shall
cooperate with the Company to protect the Company’s interests in and rights to such
Intellectual Property (including, without limitation, providing reasonable assistance in
securing patent protection and copyright registrations and executing all documents as
reasonably requested by the Company, whether such requests occur prior to or after
termination of your retention with the Company). The Company agrees to pay you for any
reasonable costs, fees and expenses incurred by you for providing your assistance pursuant
to this Section 8, including, but not limited to, any of your costs, expenses and your
hourly fees if such assistance is provided after your termination for any reason.

          (b) In accordance with Section 2872 of the Illinois Employee Patent Act, Ill. Rev.
Stat. Chap. 140, § 301 et seq. (1983), you are hereby advised that Section 8 of this
Agreement regarding the Company’s ownership of Intellectual Property does not apply to any
invention for which no equipment, supplies, facilities or trade secret information of the
Company was used and which was developed entirely on your own time, unless (i) the invention
relates to the business of the Company or any of its subsidiaries or to the Company’s or any
of its subsidiaries actual or demonstrably anticipated research or development or (ii) the
invention results from any work performed by you for or on behalf of the Company or any of
its subsidiaries.

     8. Binding Effect. The terms hereof shall be binding upon and shall inure to the
benefit of you and the Company, the successors and assigns of the Company, and the heirs,
executors, administrators, legal representatives and assigns of you, provided that
your rights and obligations hereunder may not be delegated or assigned.

     9. Entire Agreement. This letter agreement shall supersede any former oral agreement
and any former written agreement heretofore executed relating generally to your retention with or
employment by the Company, and this letter agreement can only be amended, altered or terminated and
its provisions can only be waived by an agreement in writing signed by you and the Company;
provided, however, that, except for the definition of “Cause” in Section 5(d)
hereof, this letter agreement shall not be deemed to supersede any restricted stock, equity award
or other agreement between the Company and you.

 

 

January 3, 2007

Mr. James Gray

Page 8

     10. Representations. You hereby represent and warrant to the Company that (a) the
execution, delivery and performance of this Agreement by you does not and shall not conflict with,
breach, violate or cause a default under any contract, agreement, instrument, order, judgment or
decree to which you are a party or by which you are bound, (b) you are not a party to or bound by
any retention agreement, employment agreement, noncompete agreement or confidentiality agreement
with any person or entity other than the Company and/or its subsidiaries and (c) upon the execution
and delivery of this Agreement by the Company, this Agreement shall be the valid and binding
obligation of you, enforceable in accordance with its terms. You hereby acknowledge and represent
that you have consulted with independent legal counsel regarding your rights and obligations under
this Agreement and that you fully understand the terms and conditions contained herein.

     11. Cooperation. During the term of your retention and for a period of two (2) years
after termination of your retention for any reason, you shall reasonably cooperate with the Company
in (a) any internal investigation or any administrative, regulatory or judicial proceeding (so long
as such investigation or proceeding is not adversarial in nature between you and the Company) or
(b) any dispute with a third party, as reasonably requested by the Company (including, without
limitation, being available to the Company upon reasonable advance notice for interviews and
factual investigations, appearing at the Company’s request to give testimony without requiring
service of a subpoena or other legal process, volunteering to the Company all pertinent information
and turning over to the Company all relevant documents which are or may come into your possession,
all at times and on schedules that are reasonably consistent with your other activities and
commitments). In the event the Company requires your cooperation in accordance with this Section,
the Company shall reimburse you for all reasonable travel and other out-of-pocket expenses
(including lodging and meals) incurred by you in connection therewith promptly upon submission of
receipts therefor.

     12. Remedies. In the event that you violate any of the provisions hereof, you hereby
acknowledge that the Company will suffer irreparable damages and will be entitled to full
injunctive relief or such other relief against you as may be provided by law or in equity.

     13. Enforceability. This letter agreement shall be construed and enforced under the
laws of the State of Illinois without giving effect to the principles of conflicts of laws thereof.
If any provision of this letter agreement is held invalid or unenforceable by operation of law or
otherwise, such circumstances shall not have the effect of rendering any of the other provisions of
this letter agreement invalid or unenforceable.

     14. Nature of Services. Notwithstanding anything herein to the contrary, your services
hereby shall be performed in an autonomous and independent manner, consistent with the obligations
of a director under applicable law. Subject to the provisions of such law, the Company shall have
no power to control the means and methods utilized by you in discharging your duties hereunder.

[Signature Page Follows]

 

 

Signature Page to Retention Letter Agreement

     By signing below, the Company agrees to all of the terms and conditions of this letter
agreement. Please indicate your acceptance of these terms and conditions by signing each enclosed
copy of this letter agreement where indicated below, and return an originally-executed copy of this
letter agreement to the undersigned.

	 	 	 	 	 
	 	Sincerely yours,

optionsXpress Holdings, Inc.

 	 
	 	By:  	/s/  David Kalt
 	 
	 	 	David Kalt, Chief Executive Officer 	 
	 

ACCEPTED AND AGREED as of

this 3rd day of January, 2007

	 	 	 
	/s/ James Gray
	 	 
	James Gray

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