EXHIBIT 2(b)
FORM OF SEVERANCE AGREEMENT FOR GROUP A
AMENDED AND RESTATED SEVERANCE AGREEMENT
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This Severance Agreement (this "Agreement") is made as of ____________
__, 1997 by and between FIBREBOARD CORPORATION, a Delaware corporation (the
"Company"), and _________________ ("Executive").
RECITALS
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[WHEREAS the Company and Executive have previously entered into
Severance Agreements dated as of _________________ and as of _________________
(the "Prior Agreements") providing for certain benefits to be conferred upon
Executive under specified circumstances in the event that (i) Executive's
employment is terminated by the Company or (ii) Executive voluntarily terminates
his employment with the Company, all upon the terms and conditions set forth
therein;]/1/
WHEREAS the Board of Directors of the Company has approved a new
severance agreement to provide Executive with certain additional benefits and to
conform the terms of such agreement to the current policy of the Company
regarding an officer's entitlement to benefits upon the termination of his
employment;
NOW THEREFORE, the parties hereto agree as follows:
1. Termination Absent a Change of Control.
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(a) If, prior to a Change of Control, (i) the Company terminates
Executive's employment for any reason other than Permanent Total Disability
or Cause, or (ii) Executive voluntarily terminates his employment under
circumstances involving a Constructive Termination, Executive will be
entitled to the following compensation:
(1) One year's Base Salary; and
(2) An amount equal to the Target Level Bonus (as defined in
Paragraph 12(f) below) for the fiscal year of termination; and
(3) An amount equal to the Target Level Bonus for the fiscal
year of termination, prorated for the period of Executive's
actual employment during the fiscal year of termination.
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/1/ For CEO, WHEREAS clause will refer to CEO's employment agreement.
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(b) The compensation payable under subparagraphs 1(a)(1), (2) and (3)
above shall be paid in a single lump sum within thirty (30) days following
the last date of Executive's employment.
2. Termination On or After A Change of Control.
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(a) If within a two-year period after a Change of Control (i) the Company
(or any successor) terminates Executive's employment for any reason other
than Permanent Total Disability or Cause or (ii) Executive voluntarily
terminates his employment under circumstances involving a Constructive
Termination, Executive will be entitled to the following compensation:
(1) 24/2/ months' Base Salary; and
(2) An amount equal to two times/3/ the greater of:
(A) The Target Level Bonus for the fiscal year of termination,
or
(B) The product of (i) the average of the proportion the
executive's annual bonus bore to the executive's Base Salary for
the three years fiscal years prior to the date of termination,
multiplied by (ii) the executive's Base Salary [(the greater of
(A) or (B) being the "Bonus")], [or
(C) any bonus provided under an employment agreement between the
Company and the Executive (the greater of (A), (B) or (C) being
the "Bonus")]/4/; and
(3) The Bonus, prorated for the period of Executive's actual
employment during the fiscal year of termination.
[(b) If within a six-month period following a Change of Control, Executive
voluntarily terminates his employment under circumstances not involving a
Constructive Termination, Executive will be entitled to 75% of the sums
provided in paragraphs 2(a)(1) and 2(a)(2) and 100% of the sum provided in
paragraph 2(a)(3)
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/2/ 36 months for CEO.
/3/ Three times for CEO.
/4/ For CEO only.
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(calculated as if his employment was terminated under circumstances
involving a Constructive Termination).]/5/
(c) The compensation payable under paragraphs 2(a) or (b) above will be
paid in a single lump sum within thirty (30) days after the last date of
Executive's employment.
(d) In the event of a termination of Executive's employment under the
circumstances described in this paragraph 2:
(1) All outstanding options, restricted stock rights and phantom
stock units (valued as of the date of termination of Executive's
employment) previously awarded to Executive shall, to the extent not
already vested, immediately vest and the Company shall promptly issue
stock or cash, as the case may be, to Executive as called for by the
terms of such awards; and
(2) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued through the date of termination
under any non-qualified deferred compensation plan or arrangement
shall immediately vest and be payable, to the extent permissible under
the terms of such plan or arrangement.
[(e) Following a Change of Control, upon a termination of employment under
the circumstances described in this paragraph 2, the Company shall continue
to provide the Executive with the use of his office for 90 days following
the termination of his employment.]/6/
3. Bonus Payment for Year Preceding Termination. If Executive's employment is
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terminated for any reason other than Cause prior to the date that the Board
of Directors has determined to award bonuses for a prior fiscal year,
Executive shall receive a bonus equal to the bonus he would have received
if his employment had not been terminated.
4. Voluntary Termination. If Executive voluntarily terminates his employment
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other than as provided in paragraph 1 or 2 above, Executive shall not be
entitled to any benefits under this Agreement; provided, however, that, if
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more than two years after a Change of Control, Executive's employment is
terminated under circumstances which would have, absent a Change of
Control, entitled Executive to benefits under paragraph 1, Executive will
be deemed to have terminated his employment under paragraph 1.
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/5/ For senior executives only (not CEO). CEO has similar right via his
employment agreement.
/6/ For CEO only.
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5. Termination due to Death or Disability. If Executive's employment
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terminates due to death or Permanent Total Disability, Executive shall be
paid an amount equal to the Target Level Bonus for the fiscal year of
termination, prorated for the period of Executive's actual employment
during the fiscal year of termination. Executive shall not be entitled to
any other benefits under this Agreement, but shall be entitled to any other
benefits to which he is otherwise entitled under the terms of any employee
benefit plans of the Company.
6. Continuation of Insurance Benefits. In the event Executive's employment
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terminates under the circumstances described in paragraph 2(a) of this
Agreement, the Company will continue Executive's participation and coverage
for a period of two/7/ years (the "Severance Period") from Executive's last
day of employment with the Company under all the Company's life, medical,
dental plans and other welfare benefit plans (but excluding the Company's
disability plans) ("Insurance Benefits"), and all perquisites and fringe
benefit plans and programs (other than the Company's Profit Sharing/401(K)
Plan) (the perquisites and fringe benefits together being the "Fringe
Benefits") in which Executive is participating immediately prior to such
employment termination, under the same coverages and on the same terms as
in effect immediately prior to termination; provided, however, that if his
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continued participation is not possible under the general terms and
provisions of such plans and programs, the Company shall arrange to provide
him with substantially similar benefits; provided, further, that if any
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other Company plan, arrangement or agreement provides for continuation of
Insurance Benefits and Fringe Benefits then the Executive shall receive
such coverage under such other plan, arrangement or agreement, and if the
period of such coverage is shorter than the Severance Period, then the
Executive shall receive pursuant to this section, such coverage for the
remainder of the Severance Period. In the event Executive's employment
terminates under the circumstances described in paragraph 2(b) of this
Agreement, the Company shall continue Executive's participation and
coverage in the Insurance Benefits and Fringe Benefits for a period of 18
months (the "Severance Period") from Executive's last day of employment
with the Company subject to the same provisions as provided in the prior
sentence. In the event Executive's employment terminates under the
circumstances described in paragraph 1 of this Agreement, then the Company
shall provide such Insurance Benefits and Fringe Benefits for one year from
Executive's last day of employment with the Company.
7. Additional Benefit Accruals, Pension Contributions and Relocation
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Assistance. In the event Executive's employment is terminated under the
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circumstances described in paragraph 2 of this Agreement then: (i) the
Executive shall also receive additional service credit (including, benefit
accrual and vesting credit) for the Severance Period under any Company
pension plan in which Executive participates; provided, however, that in
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the case of a qualified pension plan, the Executive shall be paid (within
30 days after his last day of employment) a cash lump equal to the present
value of the additional benefits Executive would have accrued if he had
been credited for all
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/7/ Three years for CEO.
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purposes with the additional years of service under such plan; (ii)
Executive shall also be provided with additional age and service credit for
the Severance Period under the Officer Early Retirement Medical Program, or
any successor thereto; (iii) the executive shall receive an additional
payment equal to 4% of 1997 salary and bonus (including the payments
provided in Paragraph 2); (iv) a contribution to the SERP equal to the SERP
contribution that would have been made on behalf of the Executive if his
employment had continued through the Severance Period; and [(v) if
Executive relocates to California, up to $75,000 to reimburse Executive's
actual relocation expenses (i.e., moving vans, loss on the sale of his
residence, lease buyout costs, closing costs, real estate commissions,
etc.); provided, however, that to the extent such relocation expenses are
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paid or reimbursed by another party (i.e., a new employer) the Company
shall not reimburse Executive's relocation expenses; provided, further,
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that such relocation expenses shall only be reimbursed if the Executive
provided the Company with written notice of his intent to relocate to
California within 12 months of his last date of employment and completed
such relocation within 18 months of such date]/8/. [In addition, if so
requested by the Executive, outplacement services shall be provided by a
professional outplacement provider at a cost to the Company of not more
than 20% of the Executive's Base Salary.]/9/
8. Certain Additional Payments by the Company:
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(a) Anything in this Agreement to the contrary notwithstanding, if it is
determined (as hereafter provided) that any payment or distribution by the
Company (other than relocation expenses) 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 pursuant to or by reason of any
other agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar right, or
the lapse or termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment"), would be subject to
the excise tax imposed by Section 4999 of the Code (or any successor
provision thereto) by reason of being "contingent on a change in ownership
or control" of the Company, within the meaning of Section 280G of the Code
(or any successor provision thereto) or to any similar tax imposed by state
or local law, or any interest or penalties with respect to such excise tax
(such tax or taxes, together with any such interest and penalties, are
hereafter collectively referred to as the "Excise Tax"), then the Executive
will be entitled to receive an additional payment or payments (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 any 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.
(b) Subject to the provisions of Section 8(f) hereof, all determinations
required to be made under this Section 8, including whether an Excise Tax
is payable by the Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is
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/8/ Only for executives who relocated from California and Xxx Xxxxxxxxx (for
relocation back to Colorado).
/9/ Xxxx Xxxxxx only.
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required and the amount of such Gross-Up Payment, will be made by the
nationally recognized firm of certified public accountants (the "Accounting
Firm") used by the Company prior to the Change of Control. The Company
will direct the Accounting Firm to submit its determination and detailed
supporting calculations to both the Company and the Executive within 15
calendar days after the executive's date of termination, if applicable, and
any other such time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax is
payable by the Executive, the Company will pay the required Gross-Up
Payment to the Executive within five business days after receipt of such
determination and calculations. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it will, at the same time as it
makes such determination, furnish the Executive with an opinion that he has
substantial authority not to report any Excise Tax on his federal, state,
local income or other tax return. Any determination by the Accounting Firm
as to the amount of the Gross-Up Payment will be binding upon the Company
and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local tax
law at the time of any determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments that will not have been made by the
Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts or fails to pursue its remedies pursuant to Section 8(f) hereof
and the Executive thereafter is required to make a payment of any Excise
Tax, the Executive will direct the Accounting Firm to determine the amount
of the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and the Executive as
promptly as possible. Any such Underpayment will be promptly paid by the
Company to, or for the benefit of, the Executive within five business days
after receipt or such determination and calculations.
(c) The Company and the Executive will each provide the Accounting Firm
access to and copies of any books, records and documents in the possession
of the Company or the Executive, as the case may be, reasonably requested
by the Accounting Firm, and otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determination
contemplated by Section 8(b) hereof.
(d) The federal, state and local income or other tax returns filed by the
Executive will be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable
by the Executive. The Executive will make proper payment of the amount of
any Excise Tax, and at the request of the Company, provide to the Company
true and correct copies (with any amendments) of his federal income tax
return as filed with the Internal Revenue Service and corresponding state
and local tax returns, if relevant, as filed with the applicable taxing
authority, and such other documents reasonably requested by the Company,
evidencing such payment. If prior to the filing of the Executive's federal
income tax return, or corresponding state or local tax return, if relevant,
the Accounting Firm determines
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that the amount of the Gross-Up Payment should be reduced, the Executive
will within five business days pay to the Company the amount of such
reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by
Sections 8(b) and (d) hereof will be borne by the Company. If such fees
and expenses are initially advanced by the Executive, the Company will
reimburse the Executive the full amount of such fees and expenses within
five business days after receipt from the Executive of a statement therefor
and reasonable evidence of his payment thereof.
(f) The Executive will notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification will be given as
promptly as practicable but no later than 10 business days after the
Executive actually receives notice of such claim and the Executive will
further apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid (in each case, to the extent known
by the Executive). The Executive will not pay such claim prior to the
earlier of (a) the expiration of the 30-calendar-day period following the
date on which he gives such notice to the Company and (b) the date that any
payment of amount 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 will:
(i) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company;
(ii) take such action in connection with contesting such claim as the
Company will reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and 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;
provided, however, that the Company will bear and pay directly all costs
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and expenses (including interest and penalties) incurred in connection with
such contest and will indemnify and hold harmless the Executive, on an
after-tax basis, for and against any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing provisions of this Section 8(f), the Company will control all
proceedings taken in connection with the contest of any claim contemplated
by this Section 8(f) and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority
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in respect of such claim (provided, however, that the Executive may
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participate therein at his own cost and expense) and may, at its option,
either direct the Executive to pay the tax claimed and xxx 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 will determine; provided, however, that if the
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Company directs the Executive to pay the tax claimed and xxx for a refund,
the Company will advance the amount of such payment to the Executive on an
interest-free basis and will 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;
and provided further, however, that any extension of the statute of
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limitations relating to payment of taxes for the taxable year of the
Executive with respect to which the contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's
control of any such contested claim will be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the Executive
will 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.
(g) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 8(f) hereof, the Executive receives any refund
with respect to such claim, the Executive will (subject to the Company's
complying with the requirements of Section 8(f) hereof) promptly pay to the
Company the amount of such refund (together with any interest paid or
credited thereon after any taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 8(f) hereof, a determination is made that the Executive will 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 or
refund prior to the expiration of 30 calendar days after such
determination, then such advance will be forgiven and will not be required
to be repaid and the amount of such advance will offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid pursuant to
this Section 8.
9. No Other Severance Benefits. Other than any welfare benefits or relocation
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benefits provided under any other Company plan, program or arrangement, the
foregoing severance benefits will be in lieu of all severance payments and
benefits to which Executive might otherwise be entitled under the Company's
general severance policy, if any.
10. Term. This Agreement shall be effective from the date hereof until the
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second anniversary of a Change of Control.
11. Attorneys' Fees. The Company will pay the reasonable attorneys' fees of
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Executive that were incurred by him in enforcing his rights under this
Agreement if Executive subsequently obtains any benefits under this
Agreement, whether by way of settlement or litigation.
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12. Certain Defined Terms. As used herein, the following terms shall have the
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following meanings:
(a) "Base Salary" shall mean the greater of the annual salary paid to
Executive as of the date of termination of his employment or the date of
the Change of Control, as the case may be.
(b) "Cause" shall mean:
(i) conviction of any felony, or
(ii) willful and continued failure to substantially perform his
duties as an Executive of the Company (other than as a result of total
or partial incapacity due to physical or mental illness (habitual
drunkenness or abuse of drugs or controlled substances not being
considered a physical or mental illness for purposes of this
paragraph)) unless within 30 days after written notice has been
provided to the Executive by the Board of Directors, the Executive
cures the conduct which was the basis for such willful and continued
failure.
(c) "Change of Control" shall mean:
(i) the holders of the voting securities of the Company shall have
approved a merger or consolidation of the Company with any other
entity, unless the proposed merger or consolidation would result in
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 50% of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation;
(ii) a plan of complete liquidation of the Company shall have been
adopted or the holders of voting securities of the Company shall have
approved an agreement for the sale or disposition by the Company (in
one transaction or a series of transactions) of all or substantially
all of the Company's assets; or
(iii) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 ("1934 Act")) shall become the
"beneficial owner" (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of 15% or more of the combined voting power of
the Company's then outstanding shares;
(iv) during any period of two consecutive years, members who at the
beginning of such period constituted the Board of Directors shall have
ceased for any reason to constitute a majority thereof, unless the
election, or nomination for election by the Company's stockholders, of
each director shall have been approved by the vote of at least two-
thirds of the directors then still
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in office and who were directors at the beginning of such period (so
long as such director was not nominated by a person who has expressed
an intent to effect a Change of Control or engage in a proxy or other
control context); or
(v) the occurrence of any other change of control of a nature that
would be required to be reported in accordance with Form 8-K pursuant
to Sections 13 or 15(d) of the 1934 Act or in the Company's proxy
statement in accordance with Schedule 14A of Regulation 14A
promulgated under the 1934 Act, or in any successor forms or
regulations to the same effect.
(d) A "Constructive Termination" shall be deemed to have occurred if (i)
Executive's Base Salary is reduced without his written consent, or (ii)
Executive's annual compensation potential (consisting of Base Salary plus
total annual bonus potential) is reduced without his written consent, or
(iii) Executive is required by the Company without his written consent to
relocate to a new place of business that is more than fifty miles from the
Executive's place of business prior to the Change of Control (or a
substantial increase in the amount of required business travel), or (iv)
there is a material adverse change in the Executive's duties or
responsibilities in comparison to the duties or responsibilities which the
Executive had prior to the Change of Control.
(e) "Permanent Total Disability" shall mean: If at the end of any month
Executive then is, and has been, for six (6) consecutive full calendar
months then ending, or eighty (80) or more of the normal working days
during the twelve (12) consecutive full calendar months then ending, unable
to perform his duties in the normal and regular manner due to mental or
physical illness or injury, Executive will be deemed to be in a state of
Permanent Total Disability. Any determination of such inability to perform
shall be made by the Executive's physician in good faith.
(f) "Target Level Bonus" shall mean the bonus that would have been payable
to Executive under the Company's Annual Cash Incentive Program for the
fiscal year of termination assuming that Executive's employment had
continued for the full year and the Company or the applicable business
unit, as the case may be, had achieved the "Target" level of earnings for
the year previously set by the Board of Directors under this Program.
(g) For purposes of subparagraphs 1(a)(3), 2(a)(3) and 5 of this
Agreement, applicable bonus amounts shall be "prorated" for the period of
Executive's actual employment during the fiscal year of termination by
multiplying the applicable bonus amount by a fraction, the numerator of
which shall be the number of days of Executive's employment during such
year and the denominator of which shall be 365.
13. Modification and Waiver of Breach. No waiver or modification of this
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Agreement shall be binding unless it is in writing, signed by the parties
hereto. No waiver of a breach hereof shall be deemed to constitute a
waiver of a further breach, whether of a similar or dissimilar nature.
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14. Assignment. This Agreement shall be binding upon and inure to the benefit
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of any successors of the Company. As used herein, "successors" shall
include any person, firm, corporation or other business entity which at any
time, whether by merger, purchase or otherwise, acquires substantially all
of the assets or business of the Company.
15. Notice. Any written notice to be given hereunder to Executive may be
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delivered to him personally or shall be deemed to have been given upon
deposit thereof in the U.S. mail, certified mail, postage prepaid,
addressed to Executive at the address as it shall appear on the records of
the Company.
16. Construction of Agreement. This Agreement is made and entered into in the
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State of California and shall be construed under the laws of California.
17. Entire Agreement. [This Agreement supersedes and replaces the Prior
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Agreements in their entirety, and after the execution hereof by Executive
and the Company, the Prior Agreements shall no longer be of any further
force or effect.]/9/ This Agreement constitutes the entire understanding
between the parties with respect to Executive's severance pay in the event
of a termination of Executive's employment with the Company, superseding
all negotiations, prior discussions and preliminary agreements, written or
oral, concerning said severance pay [;provided, however, that upon any
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termination of employment the Executive shall receive the greater of (i)
the payments and benefits provided under this Agreement, and (ii) the
payments and benefits provided in the Amended and Restated Employment
Agreement between the Executive and the Company dated as of January 1,
1995]/10/. This Agreement may not be amended except in writing by the
parties hereto.
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/9/ Senior executives other than the CEO.
/10/ CEO only.
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18. Counterparts. This Agreement may be executed in counterparts.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
FIBREBOARD CORPORATION
By
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Xxxx X. Xxxxx
Chairman, President and
Chief Executive Officer
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Executive
