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(Form with Gross-Up)
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS Change in Control Severance Agreement ("Agreement") is made effective
as of the 1st day of April, 2000 (the "Effective Date"), between American
General Corporation, a Texas corporation having its principal place of business
in Houston, Texas (the "Company" as hereinafter defined) and _________________
("the Executive").
WHEREAS, the Company considers it essential to the best interests of its
shareholders to xxxxxx the continued employment of key management personnel
that are employed by the Company and/or its Affiliates; and
WHEREAS, the Company's Board of Directors recognize that, as is the case
of many publicly held corporations, the possibility of a change in control
exists and that such possibility, and the uncertainty that it may engender
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its Affiliates and the Company's
shareholders; and
WHEREAS, the Company's Board of Directors has determined that appropriate
steps should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's and its Affiliates' management,
including the Executive, to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the possibility of a
change in control.
NOW, THEREFORE, for and in consideration of the premises and the
respective covenants and obligations specified herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Executive agree as follows:
1. Defined terms:
1.1. "Additional Payment" shall have the meaning set forth in
Section 4.7.
1.2. "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Securities Exchange Act of 1934, as amended
from time to time.
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1.3. "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Securities Exchange Act of 1934, as amended from time to time.
1.4. "Board" means the Company's Board of Directors.
1.5. "Cause" for purposes of this Agreement means only the following
actions or inactions: [i] a willful material misrepresentation by the Executive
pertaining to the business or property of the Company or its Affiliates, [ii]
misappropriation by the Executive of a material aspect of the business or
property of the Company or its Affiliates, [iii] the Executive willfully causes
material damage to the property or business of the Company or its Affiliates,
[iv] willful gross neglect by the Executive to substantially perform the
Executive's duties with the Company or its Affiliates (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to Section 5.1), [v]
the engaging by the Executive in willful gross misconduct resulting in
demonstrable and material economic harm to the Company or its Affiliates, or
[vi] the Executive's conviction of a felony that either involves moral turpitude
or involves some aspect of the business or property of the Company or its
Affiliates.
1.6. "Change in Control" shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred:
[A] Any Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company (not including in the securities beneficially
owned by such Person any securities acquired directly from the Company or
its Affiliates) representing thirty percent (30%) or more of the combined
voting power of the Company's then outstanding securities, excluding any
Person who becomes such a Beneficial Owner in connection with a
transaction described in clause (i) of Paragraph C below; or
[B] The following individuals cease for any reason to constitute a majority
of the number of directors then serving on the Board: individuals who, on
the date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company), whose appointment or election by the Board or nomination for
election by the Company's shareholders was approved or recommended by a
vote of at least two-thirds (2/3)
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of the directors then still in office who either were directors on the
date hereof or whose appointment, election or nomination for election was
previously so approved or recommended; or
[C] There is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other corporation
[or a share exchange between shareholders of the Company or any direct or
indirect subsidiary of the Company and another corporation or entity
pursuant to Article 5.02 (or any successor provision thereto) of the Texas
Business Corporation Act] other than (i) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any subsidiary of the
Company, at least fifty-one percent (51%) of the combined voting power of
the securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of
the Company's then outstanding securities; or
[D] The shareholders of the Company approve a plan of complete liquidation
or dissolution of the Company or there is consummated an agreement for the
sale or disposition of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or substantially
all of the Company's assets to an entity, at least fifty-one percent (51%)
of the combined voting power of the voting securities of which are owned
by shareholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, a Change in Control shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
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1.7. "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.8. "Committee" shall mean the Personnel Committee of the Board until six
months prior to the occurrence of a Change in Control and thereafter shall mean
(i) the individuals (not fewer than three in number) who, on the date six
months before a Change in Control, constitute the Personnel Committee of the
Board, plus (ii) in the event that fewer than three individuals are available
from the group specified in clause (i) above for any reason, such individuals
as may be appointed by the individual or individuals so available [including
for this purpose any individual or individuals previously so appointed under
this clause (ii)]; provided, however, that the maximum number of individuals
constituting the Committee shall not exceed five.
1.9. "Company" means American General Corporation, a Texas corporation,
and, except in determining under Section 1.6 hereof whether any Change in
Control has occurred, shall include any successor to American General
Corporation's business and/or assets which assumes and agrees to perform this
Agreement by operation of law or otherwise.
1.10. "Date of Termination" shall have the meaning specified in
Section 5.1.
1.11. "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if: (i) as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the
Company for a period of six (6) consecutive months, (ii) a physician agreed
upon by the Executive (or the Executive's legal representative) and the Company
(or, if the parties hereto are unable to agree upon a single physician, a third
physician agreed upon by the two physicians, each of whom has been selected by
either the Executive [or the Executive's legal representative] or the Company)
shall have determined that the Executive will be incapable, due to physical or
mental illness, of substantially performing the Executive's duties and
responsibilities to the Company or its Affiliates, (iii) the Company shall have
given the Executive a Notice of Termination based on Disability, and (iv)
within thirty (30) days after such Notice of Termination is given, the
Executive shall not have returned to the full-time performance of the
Executive's duties.
1.12. "Good Reason" for termination of the Executive's employment by the
Executive means the occurrence of any one or more of the following, without the
Executive's express written consent, on or after any Change in Control, or
during an
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applicable Period of Anticipated Change in Control, but, in either case, only
as specified below in Section 4.4:
1.12.1. A material reduction in the nature or scope of the Executive's
authorities or duties from the Executive's authorities and duties either
[i] immediately prior to the date on which a Change in Control occurs or
[ii] immediately prior to a Period of Anticipated Change in Control during
which a material reduction in the nature or scope of the Executive's
authorities or duties occurs at the request of the Person causing the
Company to be in such Period of Anticipated Change in Control, as the case
may be.
1.12.2. A reduction in the Executive's annual base salary as in effect
either [i] immediately prior to the date on which a Change in Control
occurs or [ii] immediately prior to a Period of Anticipated Change in
Control during which the Executive's annual base salary is reduced at the
request of the Person causing the Company to be in such Period of
Anticipated Change in Control, as the case may be.
1.12.3. A diminution in the Executive's eligibility to participate or
level of participation in bonus, stock option, incentive award and other
compensation plans which provide opportunities to receive compensation,
from the greater of: (a) the opportunities provided by the Company
(including its Affiliates) for other executives with the Company
(including its Affiliates) with comparable duties or (b) the opportunities
under any such plans under which the Executive was participating either
[i] immediately prior to the date on which a Change in Control occurs or
[ii] immediately prior to a Period of Anticipated Change in Control during
which the Executive's eligibility or level of participation is diminished
at the request of the Person causing the Company to be in such Period of
Anticipated Change in Control, as the case may be.
1.12.4. A diminution in the Executive's benefits (including but not
limited to pension, thrift, medical, dental, life insurance, long-term
disability plans) and perquisites applicable to Executive, from the
greater of: (a) the employee benefits and perquisites provided by the
Company (including its Affiliates) to other executives with comparable
duties with the Company (including its Affiliates) or (b) the employee
benefits and perquisites to which the Executive was entitled either [i]
immediately prior to the date on which a Change in Control occurs or [ii]
immediately prior to a Period of Anticipated Change in Control during
which the Executive's benefits are reduced at the request of
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the Person causing the Company to be in such Period of Anticipated Change
in Control, as the case may be.
1.12.5. A change in the location of the Executive's principal place of
employment by the Company (or its Affiliates) by more than fifty (50)
miles from the location where the Executive was principally employed
either [i] immediately prior to the date on which a Change in Control
occurs or [ii] immediately prior to a Period of Anticipated Change in
Control during which there occurs the Executive's change of location at
the request of the Person causing the Company to be in such Period of
Anticipated Change in Control, as the case may be.
1.12.6. A determination by the Board that as a result of a Change in
Control or the occurrence of an event that commences a Period of
Anticipated Change in Control and a change in circumstances thereafter
significantly affecting the Executive's position, the Executive is or
shall be unable to exercise the authorities or duties attached to the
Executive's position as in effect immediately prior to the date on which
the Change in Control occurs or will occur.
1.13. "Notice of Termination" has the meaning specified in Section 5.1.
1.14. "Period of Anticipated Change in Control" shall have the following
meaning for the purposes of this Agreement: the Company shall be deemed to be
in a Period of Anticipated Change in Control during the time which commences
when either [a] a Person has submitted a written offer to the Company which, if
accepted by the Company, would result in an agreement the consummation of which
would constitute a Change in Control and/or [b] the Company has entered into a
written signed agreement with a Person the consummation of which would
constitute a Change in Control. The Period of Anticipated Change in Control
ends when the Company either rejects such written offer or terminates, cancels
or consummates such agreement. There may be more than one period of time in
which the Company is in a Period of Anticipated Change in Control.
1.15. "Person" has the meaning specified in Section 3(a)(9) of the
Securities Exchange Act of 1934 (as amended from time to time) and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include [i]
the Company or any of its subsidiaries, [ii] a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
Affiliates, [iii] an underwriter temporarily holding securities pursuant to an
offering of such securities, or [iv] a corporation
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owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
2. This Agreement is not a contract of employment and does not modify the
at-will nature of the Executive's employment relationship:
2.1. This Agreement is not an employment agreement. This Agreement shall
not be construed as creating an express or implied contract of employment and
does not modify the nature of the Executive's employment relationship with the
Company or its Affiliates, as the case may be. Except as otherwise agreed in
writing between the Executive and the Company or an Affiliate, the employment
relationship between the Executive and the Company or its Affiliates is
at-will, i.e., the employment relationship may be terminated at any time at the
will of either the Company or the Executive for any reason or no reason at all.
2.2. Notwithstanding any provision herein to the contrary, except as
provided in Section 4.7, no payments shall be due or payable pursuant to this
Agreement unless [i] the Executive has remained in the employ of the Company or
one of its Affiliates until there occurs, during the Term of this Agreement, a
Change in Control, or there occurs an event that commences a Period of
Anticipated Change in Control, and then [ii] the Executive's employment by the
Company or one of its Affiliates is terminated during the Term of this
Agreement either by the Company or the Executive as specified in Section 4.4.
2.3. If the Executive is employed not by the Company itself but by one of
the Company's Affiliates, then if, during the Term of this Agreement but prior
to a Change in Control and prior to a Period of Anticipated Change in Control
during which the Person seeking to acquire the Company requests that such
Affiliate be sold or disposed of, the Company sells or otherwise disposes of
such Affiliate whereby the Company no longer owns or controls, directly or
indirectly, at least a majority of the stock having the right to vote for
directors or of the equity interest of such Affiliate, this Agreement shall
automatically terminate thirty days thereafter if the Executive does not within
such thirty day period of time following the sale or other disposition become
an employee of the Company or one of its remaining majority-owned Affiliates.
3. Term and termination of this Agreement:
3.1. The Term of this Agreement shall commence on the date hereof and end
on December 31, 2002, unless further extended as hereinafter provided.
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Commencing on January 1, 2002 and each January 1 thereafter, the Term shall
automatically be extended for one additional year unless, not later than
September 30 of the preceding year, the Company or the Executive shall have
given notice not to extend the Term; provided, however, that if a Change in
Control shall have occurred during the Term, the Term shall expire no earlier
than thirty-six (36) months beyond the month in which such Change in Control
occurred. Moreover, if no Change in Control shall have occurred during the
Term, but the final day of the Term (as it may have been extended pursuant to
the immediately preceding sentence) falls within a Period of Anticipated Change
in Control, the Term of this Agreement shall be automatically extended until
either [i] the Period of Anticipated Change in Control ceases without resulting
in a Change in Control or [ii] if such Period of Anticipated Change in Control
results in a Change in Control, for thirty- six (36) complete calendar months
commencing with the month immediately following the month in which such Change
in Control occurs. Upon expiration of the Term of this Agreement, this
Agreement shall automatically terminate. The termination of this Agreement
under this Section 3.1 shall not under any circumstances constitute an event
which obligates the Company to make payments or to extend benefits to the
Executive pursuant to this Agreement.
3.2. This Agreement cannot be terminated by the Company prior to the
expiration of its Term except as provided in Section 3.1 or upon either [a] the
death of the Executive or [b] the Company terminating the Executive's
employment based on Disability in accordance with Section 1.11. Upon either
event, this Agreement shall automatically terminate. The termination of this
Agreement because of the death or Disability of the Executive shall not under
any circumstances constitute an event which obligates the Company to make
payments or to extend benefits to the Executive pursuant to this Agreement.
However, in the event that the Executive dies or incurs a Disability after the
Company has become obligated to make payments or extend benefits to the
Executive under Section 4.4 hereof, the death or Disability of the Executive
shall not affect the Executive's right, or the rights of the Executive's heirs,
legatees, executors or administrators, to receive such payments or benefits (if
such benefits are applicable after death or Disability).
4. Company's obligations to Executive upon Change in Control or during a
Period of Anticipated Change in Control:
4.1. After a Change in Control or during a Period of Anticipated Change in
Control, which, in either case, occurs during the Term of this Agreement, if
there occurs any period during which the Executive fails to perform the
Executive's full-time duties with the Company or its Affiliates, as the
case may be, as a result of
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incapacity due to physical or mental illness, the Company shall pay, or if the
Executive is employed by an Affiliate, cause the Affiliate to pay, the
Executive's full base salary to the Executive at the rate in effect at the
commencement of any such period, together with all compensation and benefits
payable to the Executive under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during such period, until the
Executive's employment is terminated by the Company or its Affiliate for
Disability or death; provided, however, that such salary payments shall be
reduced by the sum of the amounts, if any, payable to the Executive at or prior
to the time of any such salary payment under disability benefit plans of the
Company or its Affiliates or under the Social Security disability insurance
program, which amounts were not previously applied to reduce any such salary
payment.
4.2. During the Term of this Agreement, if the Executive's employment
shall be terminated for any reason other than Disability or death following a
Change in Control, or if the Executive's employment shall be terminated during
a Period of Anticipated Change in Control at the request of the Person seeking
to acquire the Company, the Company shall pay, or if the Executive is employed
by an Affiliate, cause the Affiliate to pay, the Executive's full base salary
to the Executive through the Date of Termination at the rate in effect
immediately prior to the Date of Termination or, if higher, the rate in effect
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, together with all compensation and benefits payable
to the Executive through the Date of Termination under the terms of the
Company's compensation and benefit plans, programs or arrangements as in effect
immediately prior to the Date of Termination or, if more favorable to the
Executive, as in effect immediately prior to the first occurrence of an event
or circumstance constituting Good Reason.
4.3. In addition, but not in duplication of the benefits provided in
Sections 4.5 and 4.6, the Company shall pay, or cause to be paid, to the
Executive the Executive's post-termination compensation and benefits as such
payments become due. Such post-termination compensation and benefits shall be
determined under, and paid in accordance with, the Company's compensation and
benefit plans as in effect immediately prior to the Date of Termination or, in
the case of a termination of the Executive's employment by the Executive for
Good Reason and if more favorable to the Executive, as in effect immediately
prior to the occurrence of the first event or circumstance constituting Good
Reason that is specified in the Executive's Notice of Termination; provided,
however, that the Company shall have the right at any time, even after a Change
in Control, to effect amendments, changes, or modifications to
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any and all compensation and benefit plans, programs or arrangements that are
not substantial and material.
4.4. [A] If, during the Term of this Agreement, the Executive's employment
is terminated on or after a Change in Control other than: (a) by the Company or
an Affiliate for Cause, (b) by reason of the Executive's Disability or death,
or (c) by the Executive without Good Reason; then, in addition to the Company's
obligations specified above in Sections 4.1 through 4.3, the Company shall pay,
or if the Executive is employed by an Affiliate, cause the Affiliate to pay,
the Executive the amounts and provide the Executive the benefits described in
Sections 4.5 through 4.11.
[B] During the Term of this Agreement and notwithstanding any provisions
of Subsection [A] above to the contrary, the Executive's employment shall be
considered to have been terminated under Subparagraph [A] under circumstances
that obligate the Company to pay the Executive the amounts and provide the
Executive the benefits described in Sections 4.5 through 4.11 if the
Executive's employment is terminated by the Company or its Affiliate during a
Period of Anticipated Change in Control (whether or not a Change in Control
ever occurs) and such termination was at the request of a Person who either [i]
had entered into the written signed agreement with the Company the consummation
of which would constitute a Change in Control or [ii] had submitted a written
offer to the Company which, if accepted by the Company, would result in an
agreement the consummation of which would constitute a Change in Control.
[C] During the Term of this Agreement and notwithstanding any provisions
of Subsection [A] above to the contrary, the Executive's employment shall be
considered to have been terminated under Subparagraph [A] under circumstances
that obligate the Company to pay the Executive the amounts and provide the
Executive the benefits described in Sections 4.5 through 4.11, if: (i) an event
that constitutes Good Reason occurs during a Period of Anticipated Change in
Control; (ii) such event occurs at the request of a Person who either [a] had
entered into the written signed agreement with the Company the consummation of
which would constitute a Change in Control or [b] had submitted a written offer
to the Company which, if accepted by the Company, would result in an agreement
the consummation of which would constitute a Change in Control; (iii) the
Executive notifies the Company in writing as promptly as possible, and no later
than three (3) months after the first event which constitutes Good Reason, of
the Executive's position that an event which constitutes Good Reason occurred
at the request of such Person; (iv) the Period of Anticipated Change in Control
in fact culminates in a Change in Control; and (v) the Executive refrains from
providing a Notice of Termination and continues
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to perform the Executive's duties and responsibilities until at least sixty
(60) days after a Change in Control occurs as a result of the Person having
entered into the written signed agreement with the Company or having submitted
the written offer to the Company.
[D] The right of the Executive to terminate employment for Good Reason
under Section [C] hereof is based solely on an event or events constituting
Good Reason that occur during a Period of Anticipated Change in Control. The
right of the Executive to terminate employment for Good Reason under Section
[A] hereof is in addition to the Executive's right to terminate employment for
Good Reason under Section [C] but is based solely on an event or events
constituting Good Reason that occur on or after a Change in Control. The
Executive may give a Notice of Termination under Section [A] immediately the
occurrence of the event or events constituting Good Reason [i.e., there is no
requirement under Section [A] that the Executive refrain from providing a
Notice of Termination and continue to perform the Executive's duties and
responsibilities until at least sixty (60) days after the Change in Control
occurs].
4.5. If a termination of the Executive's employment described in Section
4.4 hereof shall have occurred, in lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination and in lieu of any
severance benefits otherwise payable to the Executive, the Company shall pay,
or if the Executive is employed by an Affiliate, cause the Affiliate to pay, to
the Executive a lump sum severance payment, in cash, equal to three (3) times
the sum of [i] the Executive's annual base salary as in effect immediately
prior to the Date of Termination or, in the case of a termination of the
Executive's employment by the Executive for Good Reason and if more favorable
to the Executive, as in effect immediately prior to the occurrence of the first
event or circumstance constituting Good Reason that is specified in the
Executive's Notice of Termination, and [ii] the average annual bonus earned by
the Executive pursuant to any annual bonus or annual incentive plan maintained
by the Company or an Affiliate in which the Executive participated in respect
of the three fiscal years ending immediately prior to the fiscal year in which
occurs the Date of Termination or, in the case of a termination of the
Executive's employment by the Executive for Good Reason and if more favorable
to the Executive, the three fiscal years ending immediately prior to the fiscal
year in which occurs the first event or circumstance constituting Good Reason
that is specified in the Executive's Notice of Termination; provided, however,
that if there are fewer than three such bonuses earned by the Executive in the
applicable three-year period, the average annual bonus shall be calculated by
dividing the total amount of the annual bonuses paid by the number of annual
bonuses paid; and provided further that if the
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Executive has been so recently hired by the Company or an Affiliate that he has
not earned any annual bonus which can be used to calculate an average bonus
pursuant to this provision, he shall be deemed to have earned an average annual
bonus determined by multiplying his applicable base salary by a fraction, the
numerator of which is the total of the average annual bonuses of all employees
of the Company and its Affiliates who have change in control severance
agreements with the Company immediately prior to the Executive's Date of
Termination and the denominator of which is the total of the applicable base
salaries of such employees (as such terms are defined in their respective
change in control severance agreements and determined as if such employees had
been terminated without Cause as of the Executive's Date of Termination).
4.6. If a termination of the Executive's employment described in Section
4.4 hereof shall have occurred, for the thirty-six (36) month period
immediately following the Date of Termination, the Company shall arrange to
provide the Executive and the Executive's dependents with life, accident,
medical, and dental insurance benefits substantially similar to those provided
to the Executive and to the Executive's dependents immediately prior to the
Date of Termination or, in the case of a termination of the Executive's
employment by the Executive for Good Reason and if more favorable to the
Executive, as in effect immediately prior to the occurrence of the first event
or circumstance constituting Good Reason, at no greater cost to the Executive
than the cost to the Executive immediately prior to such date or occurrence
that is specified in the Executive's Notice of Termination; provided, however,
that the Company shall have the right to effect amendments, changes, or
modifications to any and all benefit plans, programs or arrangements that are
not substantial and material and such amendments, changes or modifications
shall apply to the Executive's benefits. Benefits otherwise receivable by the
Executive pursuant to this Section 4.6 may be reduced to the extent benefits of
the same type are received by or made available to the Executive by a successor
employer during the thirty-six (36) month period following the Executive's
termination of employment (and any such benefits received by or made available
to the Executive shall be reported to the Company by the Executive); provided,
however, that the Company shall reimburse the Executive for the excess, if any,
of the reasonable and necessary cost of such benefits to the Executive over
such cost immediately prior to the Date of Termination or, in the case of a
termination of the Executive's employment by the Executive for Good Reason and
if more favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good Reason that is
specified in the Executive's Notice of Termination. As provided in Section 6.2,
the Company may withhold from any payments made or benefits provided pursuant
to
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this Agreement all federal, State, city, or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
4.7. [A] Regardless whether or not a termination of the Executive's
employment described in Section 4.4 shall have occurred, to the extent that any
of the payments or benefits (excluding payments to be made pursuant to this
Section 4.7) received or to be received by the Executive (the "Total Payments")
in connection with a Change in Control or the Executive's termination of
employment (whether or not such payments or benefits are provided pursuant to
the terms of this Agreement or any other plan, arrangement or agreement with
the Company, with any Persons whose actions result in a Change in Control, or
with any Person affiliated with the Company or such Person) will be subject to
the excise tax imposed by Section 4999 of the Code, or any successor provision
of the Code (any such excise tax is referred to in this Section as the "Excise
Tax"), then the benefit or payment shall be increased by an amount (referred to
in this Section as the "Additional Payment") such that the net amount received
by the Executive, after paying any applicable Excise Tax and any federal, State
or local income or FICA taxes on such Additional Payment, shall be equal to the
amount that the Executive would have received if such Excise Tax were not
applicable to the Total Payments.
[B] For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments" [within the meaning of
Section 280G(b)(2) of the Code] unless, in the opinion of tax counsel ("Tax
Counsel") reasonably acceptable to the Executive and selected by the accounting
firm which was, immediately prior to the Change in Control, the Company's
independent auditor (the "Auditor"), such payments or benefits (in whole or in
part) do not constitute parachute payments, including by reason of Section
280G(b)(4)(A) of the Code; (ii) all "excess parachute payments" within the
meaning of Section 280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered [within the meaning of Section 280G(b)(4)(B) of the Code] in
excess of the base amount [as the term "base amount" is defined in Section
280G(b)(3) of the Code] allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax; and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the Auditor
in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Additional Payment, the Executive
shall be deemed to pay federal income tax at the highest marginal rate of
federal income taxation in the calendar year in which the Additional Payment is
to be
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made and State and local income taxes at the highest marginal rate of taxation
in the State and locality of the Executive's residence on the Date of
Termination (or if there is no Date of Termination, then on the date on which
the Additional Payment is calculated for purposes of this Section 4.7), net of
the maximum reduction in federal income taxes which could be obtained from
deduction of such State and local taxes.
[C] In the event that the Excise Tax is finally determined to be less than
the amount taken into account hereunder in calculating the Additional Payment,
the Executive shall repay to the Company, within ten business days immediately
following the date that the amount of such reduction in the Excise Tax is
finally determined, the portion of the Additional Payment attributable to the
amount of such reduction (including the Excise Tax component and the federal,
State and local income and employment tax components of the Additional Payment)
to the extent that such repayment results in a reduction in the Excise Tax and
a dollar-for-dollar reduction in the Executive's taxable income and wages for
purposes of federal, State and local income and employment taxes, plus interest
on the amount of such repayment at 120% of the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder in calculating the Additional
Payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Additional Payment), the Company shall
make another Additional Payment in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such excess)
within the ten (10) business days immediately following the date that the
amount of such excess is finally determined. The Executive and the Company
shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
4.8 If a termination of the Executive's employment described in Section
4.4 hereof shall have occurred, the Company shall promptly reimburse to the
Executive all reasonable attorneys fees and expenses necessarily incurred by
the Executive in disputing in good faith any issue with the Company or its
Affiliates pursuant to this Agreement or lodging in good faith any claim,
demand or cause of action against the Company or its Affiliates pursuant to
this Agreement; provided, however, that the Company shall have no obligation to
reimburse the Executive for such attorneys fees and expenses unless the
Executive is the prevailing party as to such dispute, claim, demand or cause of
action.
4.9 If a termination of the Executive's employment described in Section
4.4 hereof shall have occurred, the Company shall provide the Executive with
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outplacement services suitable to the Executive's position for a period of nine
months after the Date of Termination or, if earlier, until the first acceptance
by the Executive of an offer of employment.
4.10 If (i) the Executive is or has been granted stock options, restricted
stock, or other similar equity-based awards, whether before or after the
Effective Date, pursuant to plans, programs or arrangements which provide that
the Executive shall become fully vested upon a Change in Control and (ii) the
definition of change in control in such plans, programs or arrangements does
not provide for vesting upon the occurrence of an event creating a Period of
Anticipated Change in Control, then the following shall apply: The requisite
change in control for purposes of vesting under such plans, programs or
arrangements shall be deemed to have occurred immediately prior to a
termination described in subparagraphs (1) or (2) of this Section 4.10 if
either --
(1) The Executive's employment is terminated by the Company or an
Affiliate without Cause (and not for Disability or death) during a Period
of Anticipated Change in Control (whether or not a Change in Control ever
occurs) and such termination was at the request of a Person who either [i]
had entered into the written signed agreement with the Company the
consummation of which would constitute a Change in Control or [ii] had
submitted a written offer to the Company which, if accepted by the
Company, would result in an agreement the consummation of which would
constitute a Change in Control; or
(2) During the Term of this Agreement, the Executive's employment is
terminated as follows: (i) an event that constitutes Good Reason occurs
during a Period of Anticipated Change in Control; (ii) such event occurs
at the request of a Person who either [a] had entered into the written
signed agreement with the Company the consummation of which would
constitute a Change in Control or [b] had submitted a written offer to the
Company which, if accepted by the Company, would result in an agreement
the consummation of which would constitute a Change in Control; (iii) the
Executive notifies the Company in writing as promptly as possible, and no
later than three (3) months after the first event which constitutes Good
Reason, of the Executive's position that an event which constitutes Good
Reason occurred at the request of such Person; (iv) the Period of
Anticipated Change in Control in fact culminates in a Change in Control;
and (v) the Executive shall refrain from providing a Notice of Termination
and shall
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continue to perform the Executive's duties and responsibilities until at
least sixty (60) days after a Change in Control occurs as a result of the
Person having entered into the written signed agreement with the Company
or having submitted the written offer to the Company.
4.11 The payments provided to the Executive or for the Executive's benefit
in Sections 4.5 and 4.7[A] shall be made not later than the tenth (10) business
day following the Date of Termination; provided, however, that if the amounts
of such payments cannot be finally determined on or before such date, the
Company shall pay to the Executive on such day an estimate of the payments
under Section 4.5, as determined in good faith by the Executive and the
Company, and an estimate of the payments under Section 4.7[A], as determined in
accordance with Section 4.7[A] hereof the estimate in each case to be of the
minimum amount of such payments to which the Executive is clearly entitled, and
shall pay the remainder of such payments [together with interest on the unpaid
remainder (or on all such payments to the extent the Company fails to make such
payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the
Code] as soon as the amount thereof can be determined but in no event later
than sixty (60) days after the Date of Termination. In the event that the
amount of the estimated payment exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the tenth (10) business day after demand by the Company.
At the time the payments are made under this Agreement, the Company shall
provide the Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations,
including, without limitation, any opinions or other advice the Company has
received from Tax Counsel, the Auditor, or other advisors or consultants and
any such opinions or advice which are in writing shall be attached to the
statement.
5. Termination procedures; resolution of disputes; arbitration; and no duty to
mitigate:
5.1 After a Change in Control or during a Period of Anticipated Change in
Control, and in either case, during the Term of this Agreement, any purported
termination of the Executive's employment (other than the death of the
Executive) shall be communicated by a written notice of termination from one
party to the other in accordance with Section 6.6 (the "Notice of
Termination"). The Notice of Termination shall specify the termination
provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Executive's employment pursuant to this Agreement. The date of
termination ("Date of Termination") of the Executive's employment
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pursuant to this Agreement shall be [i] if the Executive's employment is
terminated for Disability, thirty (30) days after the Notice of Termination is
given, and [ii] if the Executive's employment is terminated pursuant to this
Agreement for any other reason, the date specified in the Notice of Termination
[which, in the case of termination by the Company or an Affiliate shall not be
less than thirty (30) days, except in the case of termination for Cause, which
may be immediate, and, in the case of a termination by the Executive, shall not
be less than fifteen (15) days nor more than sixty (60) days, from the date
such Notice of Termination is given].
5.2 All claims by the Executive for payments or benefits under this
Agreement shall be in writing, shall set forth the specific reasons for the
basis of the Executive's claim and the specific provisions of this Agreement
relied upon, shall be submitted to the Committee, and shall be decided by the
Committee. Any denial by the Committee of a claim for payments or benefits
under this Agreement shall be delivered to the Executive in writing and shall
set forth the specific reasons for the denial and the specific provisions of
this Agreement relied upon. The Committee shall afford a reasonable opportunity
to the Executive for a review of the decision denying a claim and shall further
allow the Executive to file with the Committee, within sixty (60) days after
notification by the Committee that the Executive's claim has been denied, a
request that the Committee re-consider its decision. Upon receipt of such a
request, the Committee shall reconsider its decision and notify the Executive
of the Committee's decision on reconsideration.
5.3 [A] Any further dispute or controversy arising under or in connection
with this Agreement and all claims, demands, causes of action, disputes,
controversies, and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement involving the Executive, the
Company, its Affiliates, and/or their respective representatives, even though
some or all of such claims allegedly are extra-contractual in nature, whether
such claims sound in contract, tort, or otherwise, at law or in equity, under
state or federal law, whether provided by statute or the common law, for
damages or any other relief, shall be resolved by binding arbitration pursuant
to the Federal Arbitration Act in accordance with the Employment Dispute
Resolution Rules then in effect with the American Arbitration Association. The
arbitration proceeding shall be conducted in Houston, Texas. This agreement to
arbitrate shall be enforceable in either federal or state court.
[B] The enforcement of this agreement to arbitrate and all procedural
aspects of this agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the issues
subject to arbitration (i.e.,
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arbitrability), the scope of the arbitrable issues, allegations of waiver,
delay or defenses to arbitrability, and the rules governing the conduct of the
arbitration, shall be governed by and construed pursuant to the Federal
Arbitration Act and shall be decided by the arbitrators. In deciding the
substance of any such claims, the arbitrators shall apply the substantive laws
of the State of Texas (excluding Texas choice-of-law principles that might
call for the application of some other state's law); provided, however, it is
expressly agreed that the arbitrators shall have no authority to award treble,
exemplary, or punitive damages under any circumstances regardless of whether
such damages may be available under Texas law, the parties hereby waiving their
right, if any, to recover treble, exemplary, or punitive damages in connection
with any such claims. The arbitrators are authorized to award attorneys and
fees and expenses as authorized in this Agreement.
[C] The arbitration may be initiated by any party by providing to the
other party a written notice of arbitration specifying the claims. Within 30
days of the notice of initiation of the arbitration procedure, the Executive
shall denominate one arbitrator and the Company shall denominate one
arbitrator. The two arbitrators shall select a third arbitrator failing
agreement on which within 60 days of the original notice, either the Executive
or the Company shall apply to the Senior Active United States District Judge
for the Southern District of Texas, who shall appoint a third arbitrator. While
the third arbitrator shall be neutral, the two party-appointed arbitrators are
not required to be neutral and it shall not be grounds for removal of either of
the two party-appointed arbitrators or for vacating the arbitrators' award that
either of such arbitrators has past or present minimal relationships with the
party that appointed such arbitrator. Evident partiality on the part of an
arbitrator exists only where the circumstances are such that a reasonable
person would have to conclude there in fact existed actual bias and a mere
appearance or impression of bias will not constitute evident partiality or
otherwise disqualify an arbitrator.
[D] The three arbitrators shall by majority vote resolve all disputes
between the parties. There shall be no transcript of the hearing before the
arbitrators. The arbitrators' decision shall be in writing, but shall be as
brief as possible. The arbitrators shall not assign the reasons for their
decision. The arbitrators shall certify in their award that they have
faithfully applied the terms and conditions of this Agreement and that no part
of their award includes any amount for exemplary or punitive damages. All
proceedings conducted hereunder and the decision of the arbitrators shall be
kept confidential by the parties, e.g., the arbitrators' award shall not be
released to the press or published in any of the various arbitration reporters.
Judgment upon any award rendered in any such arbitration proceeding may be
entered by any federal or state court having jurisdiction.
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5.4 If during the Term of this Agreement the Executive's employment
terminates under conditions that require the Company to make payments or extend
benefits pursuant to Section 4.4, the Executive is not required to seek other
employment or to attempt in any way to reduce the amounts payable to the
Executive under Section 4.4 (other than an obligation to incur no more than
reasonable and necessary attorneys fees). Further, the amount of any payment or
benefit required pursuant to this Agreement (other than pursuant to Section
4.6) shall not be reduced or offset by any compensation or benefit that may be
earned by the Executive as a result of employment by another employer after
termination of the Executive's employment hereunder by the Company or its
Affiliates, by retirement benefits, or against any amount claimed to be owed by
the Executive to the Company unless such amount is evidenced by a promissory
note or contract signed by the Executive.
6. Miscellaneous:
6.1 The applicable law and the forum for resolution of any disputes
arising out of this Agreement are specified in the agreement to arbitrate
contained in Section 5.3.
6.2 The Company may withhold from any payments made or benefits provided
pursuant to this Agreement all federal, State, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
6.3 Except as provided in Sections 4.4[C] and 4.10(2) no failure by either
party hereto at any time to give notice of any breach by the other party of, or
to require compliance with, any condition or provision of this Agreement shall
be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time.
6.4 This Agreement shall be binding upon and inure to the benefit of the
Company and any other person, association, or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of the
Company by any means whether direct or indirect, by purchase, merger,
consolidation, or otherwise. In addition to the obligations imposed by law upon
any successor to the Company, the Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain
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such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Company in the same amount and on the same terms as the
Executive would be entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control, except that,
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.
6.5 The Executive's rights and obligations pursuant to this Agreement are
personal to the Executive and such rights, benefits, and obligations of the
Executive shall not be voluntarily or involuntarily assigned, alienated, or
transferred, whether by operation of law or otherwise, without the prior
written consent of the Company, except through a transfer by testament or by
the laws of descent or distribution upon the death of the Executive. In the
event of any attempted assignment or transfer contrary to this Section 6.5, the
Company shall have no liability to pay any amount so attempted to be assigned
or transferred. This Agreement shall be enforceable against the Executive and
the Executive's personal and legal representatives, heirs, legatees, executors
and administrators.
6.6 For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Company: American General Corporation
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
If to the Executive, to the Executive's last known address on the records
of the Company.
Either the Company or the Executive may furnish a change of address to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
6.7 It is a desire and intent of the parties that the terms, provisions,
covenants and remedies contained in this Agreement shall be enforceable to the
fullest extent permitted by law. If any such term, provision, covenant, or
remedy of this Agreement or the application thereof to any person, association,
or entity or
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circumstances shall, to any extent, be construed to be invalid or unenforceable
in whole or in part, then such term, provision, covenant, or remedy shall be
construed in a manner so as to permit its enforceability under the applicable
law to the fullest extent permitted by law. In any case, the remaining
provisions of this Agreement or the application thereof to any person,
association, or entity or circumstances other than those to which they have
been held invalid or unenforceable, shall remain in full force and effect.
6.8 Each of the Company and the Executive acknowledges that no represen-
tation, inducement, promise, or agreement, oral or written, express or implied,
has been made by the other with respect to the subject matters of this Agreement
which are not expressed in this Agreement. Except for benefit and compensation
plans and grant documents thereunder that contain express change in control
provisions, this Agreement constitutes the entire agreement of the parties with
regard to the Company's Change in Control obligations to the Executive;
terminates any prior severance agreements, including the existing Severance
Agreement between the Company and the Executive; and replaces and merges
previous agreements and discussions pertaining to the Company's Change in
Control obligations to Executive. No modification or amendment of this Agreement
will be effective unless such modification or amendment is in writing and signed
by the party whose rights are affected thereby.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
to be effective as of the Effective Date stated above.
AMERICAN GENERAL
CORPORATION
By:
---------------------------
EXECUTIVE
By:
---------------------------
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