EXHIBIT 10.18
XTRA CORPORATION
Severance Agreement
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AGREEMENT, dated December 8, 1997, by and between Xxxxxxx X. Xxxx
("Executive") and XTRA Corporation (the "Company") as amended and restated as of
June 18, 1999.
WITNESSETH
Executive is a key executive of the Company or one of its subsidiaries,
responsible, in part, for the policy-making functions of the Company and the
overall viability of the Company's business; and
The Company recognizes that the possibility that certain significant
transactions involving the Company may result in the departure or distraction of
management to the detriment of the Company and its shareholders, and
The Company wishes to assure Executive of fair severance should his
employment terminate in specified circumstances following the consummation of
certain significant transactions involving the Company and to assure Executive
of certain other benefits in the event of such transactions.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. If, within the 24-month period (the "Post Significant Transaction Period")
beginning on the date of a Significant Transaction (as defined in Exhibit A
attached hereto and made a part hereof), (i) Executive's employment with
the company is terminated (i) by the Company for any reason other than for
"Cause" (as defined in paragraph 2 below), or (ii) Executive terminates
such employment for Good Reason (as defined in paragraph 4 below):
a. The Company will pay to Executive within five (5) business days of
such termination of employment a lump-sum cash payment equal to the
sum of (i) the Executive's annual base salary ("Annual Base Salary")
through the date of such termination of employment, and any earned
bonuses for any completed fiscal period, to the extent not theretofore
paid, (ii) a prorated portion (the "Prorated Bonus Amount") of the
award payable under the Company's Economic Profit Incentive Plan, or
any comparable or successor annual plan or plans in which the
Executive is then a participant (the "Cash Plan"), notwithstanding
anything
to the contrary in the Cash Plan, determined by calculating the
product of (A) the bonus payable with respect to the award for the
fiscal period in which the date of termination occurs under the Cash
Plan annualizing the Company's performance under the plan up to the
date of termination by dividing the Company's performance to the date
of termination by the number of full months in the performance period
through the date of termination and multiplying the result by 12,
times (B) a fraction, the numerator of which is the number of full
months in the current fiscal year through the date of termination of
employment, and the denominator of which is 12, and (iii) any
compensation, including compensation for the fiscal year in which the
date of termination occurs, previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in the above subsections (i) through
(iii) shall be hereinafter referred to as the "Accrued Obligations");
and
b. any stock, stock option or cash awards granted to the Executive by the
Company, including any awards under the Company's 1987 and 1997 Stock
Incentive Plans (or any successor plan or plans), that would have
become vested and exercisable had the Executive continued to be
employed by the Company shall immediately vest and become exercisable
in full notwithstanding any provision to the contrary of such grant
and shall remain exercisable until the later of (i) the latest date on
which such grant could have been exercised had the Executive remained
employed by the Company, and (ii) the date upon which any period
during which the Executive has agreed not to sell the type of
securities that may be issuable to such Executive upon the exercise of
such grant shall expire; and
c. the Company will pay to Executive within five (5) business days of
such termination of employment a lump-sum cash payment equal to two
times the sum of: (A) the amount of the Executive's Annual Base Salary
at the rate in effect immediately prior to the date of termination,
and (B) the Average Annualized Bonus Amount which shall be calculated
by multiplying by 12 the quotient determined by dividing (i) the sum
of the actual cash bonus earned by the Executive during each of the
two fiscal years immediately preceding the date of termination, plus
the Prorated Bonus Amount, by (ii) 24 plus the number of full months
in the period for which the Prorated Bonus Payment is calculated; and
d. the Company will pay to Executive within five (5) business days of
such termination of employment a lump-sum cash payment equal to the
amount of the forfeitable portion of the Executive's accrued benefit
under the Company's qualified 401(k) or other qualified retirement
plans; and
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e. Executive, together with his dependents, will continue following such
termination of employment to participate fully at the Company's
expense (subject to any required employee contributions at the rate in
effect immediately prior to the date of the Significant Transaction)
in all welfare benefit plans (other than disability insurance),
programs, practices and policies maintained or sponsored by the
Company immediately prior to the Significant Transaction, or receive
substantially the equivalent coverage (or the full value thereof in
cash) from the Company, until the second anniversary of such
termination or such longer period as may be provided by the terms of
the appropriate plan, program, practice or policy, provided, however,
that if the Executive becomes re-employed with another employer and is
eligible to receive reasonably comparable medical or other welfare
benefits under another employer provided plan, the Company's
obligation to provide the medical and other welfare benefits described
herein shall cease; and provided further that if Executive's continued
participation is not possible under the terms of such Company plans
and programs, the Company shall instead either arrange to provide
Executive with substantially similar benefits upon comparable terms or
pay to the Executive (within five (5) business days of the date of
termination) an amount equal to the full value thereof in cash; and
f. to the extent not theretofore paid or provided for, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy, practice, contract or
agreement of the Company ("Other Benefits") .
Notwithstanding anything herein to the contrary, to the extent that any
payment or benefit provided for herein is required to be paid or vested on
any earlier date under the terms of any plan, agreement or arrangements,
such plan, agreement or arrangement shall control. Further, notwithstanding
anything herein to the contrary, if a Significant Transaction occurs and if
the Executive's employment with the Company is terminated by the Company
for a reason other than Cause prior to the date upon which the Significant
Transaction occurs, and if it can be reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a
Significant Transaction or (ii) otherwise arose in connection with or in
anticipation of a Significant Transaction, then for all purposes of this
Agreement, Executive shall be entitled to the benefits provided in Sections
1(a)-(f) above.
2. Cause, Other Than For Good Reason; Disability.
---------------------------------------------
a. Cause; Other Than for Good Reason. If the Executive's employment shall
be terminated for Cause (as defined in Section 3 below), or if the
Executive
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voluntarily terminates employment, excluding a termination for Good
Reason, during the Post Significant Transaction Period, this Agreement
shall terminate without further obligations to the Executive other
than the obligation to pay the Executive (A) his Annual Base Salary
through the date of termination, (B) the amount of any compensation
previously deferred by the Executive, and (C) Other Benefits, in each
case to the extent theretofore unpaid.
b. Disability. If the Executive's employment is terminated during the
Post Significant Transaction Period by reason of the Executive's
Disability, this Agreement shall terminate without further obligations
to the Executive other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive in a lump sum in cash within five (5)
business days of the date of termination of employment. For purposes
of this Agreement, "Disability" shall mean the absence of the
Executive from the Executive's duties with the Company on a full-time
basis for 180 consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and
reasonably acceptable to the Executive or the Executive's legal
representative. If the Company determines in good faith that the
Disability of the Executive has occurred during the Post Significant
Transaction Period, it may give the Executive written notice of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive, provided
that, within the 30 days of such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties.
In the case of (a) or (b) above, all obligations shall be paid to the
Executive in a lump sum in cash within five (5) business days of date of
the termination of employment or such earlier time as may be required under
law.
3. "Cause" means only: (a) commission of a felony or gross neglect of duty by
the Executive which is intended to result in substantial personal
enrichment of the Executive at the expense of the Company, (b) conviction
of, or plea of nolo contendere to, a crime involving moral turpitude, or
(c) gross neglect by the Executive in the performance of his duties to the
Company which results in material injury to the Company, and continues for
more than 30 days after written notice given to the Executive pursuant to a
two-thirds vote of all of the members of the Board at a meeting called and
held for such purpose (after reasonable notice to Executive) and at which
meeting the Executive and his counsel were given an opportunity to be
heard, such vote to set forth in reasonable detail the nature of the
failure. For purposes of this definition of Cause, no act or omission shall
be considered to have been "willful" unless it was not in good faith and
the Executive had knowledge at the time that the act or omission was not in
the best interest of the
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Company. Any act, or failure to act, based on authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the Chief
Executive Officer or another senior officer of the Company or based on the
advice of counsel of the Company shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the best
interest of the Company.
4. Executive shall be deemed to have voluntarily terminated his employment for
Good Reason if the Executive leaves the employ of the Company for any
reason following:
a. Any action by the Company which results in a material diminution in
Executive's position, authority, duties or responsibilities
immediately prior to the Significant Transaction, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive; provided, however, a sale or
transfer of some or all of the business of the Company or any of its
subsidiaries or other reduction in its business or that of its
subsidiaries, or the fact that the Company shall become a subsidiary
of another company or the securities of the Company shall no longer be
publicly traded, shall not constitute "Good Reason" hereunder;
b. Any reduction in the Executive's rate of Annual Base Salary for any
fiscal year to less than 100% of the rate of Annual Base Salary
payable for the completed fiscal year immediately preceding the
Significant Transaction; or
c. Failure of the Company to permit the Executive to participate in all
incentive, retirement, and savings policies and programs, and all
welfare benefit plans, practices and programs (including without
limitation, life, accidental death and travel accident insurance,
medical insurance, dental insurance or disability plans) to the extent
applicable generally at the time to other peer executives of the
Company and its affiliated companies, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive; or
d. The Company requires Executive to be based at any office or location
further than 50 miles from Boston, Massachusetts; or
e. Any failure by the Company to comply with and satisfy Section 7 of
this Agreement.
5. Certain tax-related payments.
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a. If any "parachute payment" as defined in Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (the "Code"), whether
payable pursuant to
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this Agreement or otherwise, is made to or for the benefit of
Executive in connection with a Change in Control (the "Subject
Payment"), the Company will promptly pay to Executive an additional
amount in cash (the "Gross-Up Payment") which on an after-tax basis
equals the excise tax under Section 4999 of the Code and any related
interest and penalties due with respect to the "excess parachute
payment" allocable to the Subject Payment. All determinations as to
whether a Gross-Up Payment is required to be made under this Section
5, and if so the amount and timing of such Gross-Up Payment, shall be
made at the Company's expense by Xxxxxx Xxxxxxxx LLP (Boston Office)
or, if the Compensation Committee of the Company's Board of Directors
shall designate another accounting firm, employment consulting firm,
or law firm prior to a Change in Control, such other accounting firm,
employment consulting firm, or law firm (the "Consultant"). Not later
than thirty (30) days following receipt by the Consultant of notice
from Executive that a payment believed by Executive to be a Subject
Payment has been made or at such earlier time as may be requested by
the Company, the Consultant shall deliver to Executive and the Company
a preliminary statement (each such statement, a "Preliminary
Statement") containing a computation of the Gross-Up Payment, if any,
payable to Executive with respect thereto, together with supporting
work papers. If both the Company and Executive agree with the
Preliminary Statement, it shall become final (the "Final Statement").
If either the Company or Executive (the "objecting party") believes
that a Preliminary Statement is incorrect for any reason, the
objecting party may, within thirty (30) business days of receipt of
the Preliminary Statement, deliver to the Consultant and to the other
party additional information to be considered by the Consultant in
making its determination. Within ten (10) business days following
receipt by the Consultant of such additional information, it shall
either confirm its Preliminary Statement or issue another statement
that shall constitute the Final Statement. Subject to the correction
of typographic mistakes or similar manifest errors, and except as
provided at (b) below, the Final Statement shall be binding on both
parties. With respect to each Subject Payment, the Company will pay
the Gross-Up Payment to Executive not later than ten (10) business
days after the Consultant has rendered its related Final Statement.
b. If there is a determination by the Internal Revenue Service (the
"IRS") with respect to Executive that is inconsistent with a Final
Statement and that if sustained would result in an excise tax (or a
greater excise tax) under Section 4999 of the Code or in interest or
penalties (or increased interest or penalties) with respect to any
such excise tax, the Final Statement shall be deemed automatically
modified to conform to the IRS' determination and the Company, upon
receipt of written notice from Executive setting forth the IRS'
determination, shall promptly pay to Executive the additional Gross-Up
Payment required by such modification (the "Additional Gross-Up
Payment"). The
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Company may elect to contest at its expense any IRS determination in
respect of which the Company has made an Additional Gross-Up Payment,
in which case such Additional Gross-Up Payment shall be considered an
interest-free loan (the "Loan") to Executive until such time as the
IRS' determination is final and no longer subject to judicial review.
At such time Executive shall repay to the Company so much of the Loan,
if any, as shall leave him on an after-tax basis in the same position
he would have been in had the IRS' determination never been made, all
as determined by the Consultant on a preliminary and, after
opportunity for comment, final basis under rules substantially the
same as those applicable under (a) above. Executive shall cooperate
reasonably with the Company in any effort by the Company to contest an
IRS determination under this paragraph, including by the making of
such filings and appeals as the Company may reasonably require, but
nothing herein shall be construed as requiring Executive to bear any
cost or expense of such a contest or in connection therewith to
compromise any tax item (including without limitation any deduction or
credit) other than the excise tax under Section 4999 of the Code, and
related interest and penalties if any, that are the subject of the
contested IRS determination.
6. The Company agrees (i) to promptly reimburse Executive for any and all
legal fees and related expenses (including, without limitation,
stenographer fees, printing costs, etc.) incurred by him to enforce the
provisions of this Agreement or in contesting or disputing that the
termination of his employment is for Cause or other than for Good Reason
(regardless of the outcome thereof), (ii) to pay the cost of such judicial
proceeding, and (iii) to pay interest to Executive on all amounts owed to
Executive under this Agreement during any period of time that such amounts
are withheld pending judicial proceedings (such interest will be at the
base rate as published from time to time in the eastern edition of the Wall
Street Journal); provided, however, that the Company shall not be required
to reimburse the Executive for such fees, costs and expenses, if a court of
competent jurisdiction shall issue a final order to the effect that the
Executive shall not prevail on any claim relating to this Agreement.
7. If the Company is at any time before, after or in connection with, a
Significant Transaction merged or consolidated into or with any other
corporation or other entity (whether or not the Company is the surviving
entity), or if substantially all of the assets thereof are transferred to
another corporation or other entity, the provisions of this Agreement will
be binding upon and inure to the benefit of the corporation or other entity
resulting from such merger or consolidation or the acquirer of such assets
(the "Successor Entity"), and this paragraph 7 will apply in the event of
any subsequent merger or consolidation or transfer of assets. The Company
will require any such Successor Entity to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform. As used
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in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any Successor Entity which assumes and agrees to perform this Agreement
by operation of law or otherwise.
In the event of any merger, consolidation, or sale of assets described
above, nothing contained in this Agreement will detract from or otherwise
limit Executive's right to or privilege of participation in any stock
option or purchase plan or any bonus, profit sharing, pension, group
insurance, hospitalization, or other incentive or benefit plan or
arrangement which may be or become applicable to executives of the entity
resulting from such merger or consolidation or the entity acquiring such
assets of the Company.
In the event of any merger, consolidation, or sale of assets described
above, references to the Company in this Agreement shall unless the context
suggests otherwise be deemed to include the entity resulting from such
merger or consolidation or the acquirer of such assets of the Company.
8. Any termination by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with the last paragraph of Section 13 of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving of such
notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
"Date of Termination" means (i) if the Executive's employment is terminated
by the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified therein,
as the case may be, and (ii) if the Executive's employment is terminated by
the Company other than for Cause, the Date of Termination shall be the date
on which the Company notifies the Executive of such termination.
9. All payments required to be made by the Company hereunder to, or on behalf
of, Executive or his dependents, beneficiaries, or estate will be subject
to the withholding of such amounts relating to tax and/or other payroll
deductions as may be required by law.
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10. There shall be no requirement on the part of the Executive to seek other
employment or otherwise mitigate damages in order to be entitled to the
full amount of any payments and benefits to which Executive is entitled
under this Agreement, and the amount of such payments and benefits shall
not be reduced by any compensation or benefits received by Executive from
other employment, other than with respect to certain welfare benefits as
provided in the proviso to Section 1(e).
11. Nothing contained in this Agreement shall be construed as a contract of
employment between the Company and the Executive, or as a right of the
Executive to continue in the employ of the Company, or as a limitation of
the right of the Company to discharge the Executive with or without Cause;
provided that the Executive shall have the right to receive upon
termination of his employment the payments and benefits provided in this
Agreement and shall not be deemed to have waived any rights he may have
either at law or in equity in respect of such discharge.
12. No amendment, change, or modification of this Agreement may be made except
in writing, signed by both parties.
13. This Agreement shall terminate on the third anniversary of the date hereof,
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (each such date
hereinafter referred to as a "Renewal Date"), unless previously terminated,
the term of this Agreement shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least sixty days
prior to the Renewal Date the Company shall give notice to the Executive
that the term of this Agreement shall not be so extended. This Agreement
shall not apply to a Significant Transaction which takes place after the
termination of this Agreement.
Payments made by the Company pursuant to this Agreement shall be in lieu of
severance payments, if any, which might otherwise be available to Executive
under any severance plan, policy, program or arrangement generally
applicable to the employees of the Company. If for any reason Executive
receives severance payments (other than under this Agreement) upon the
termination of his employment with the Company, the amount of such payments
shall be deducted from the amount paid under this Agreement. The purpose of
this provision is solely to avert a duplication of benefits; neither this
provision nor the provisions of any other agreement shall be interpreted to
reduce the amount payable to Executive below the amount that would
otherwise have been payable under this Agreement.
The provisions of this Agreement shall be binding upon and shall inure to
the benefit of Executive, his executors, administrators, legal
representatives, and assigns, and the Company and its successors.
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The validity, interpretation, and effect of this Agreement shall be
governed by the laws of The Commonwealth of Massachusetts.
The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
The Company shall have no right of set-off or counterclaims, in respect of
any claim, debt, or obligation, against any payments to Executive, his
dependents, beneficiaries, or estate provided for in this Agreement.
No right or interest to or in any payments shall be assignable by the
Executive. No right, benefit, or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt, or obligation, or
to execution, attachment, levy, or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any
action specified in the immediately preceding sentence shall, to the full
extent permitted by law, be null, void, and of no effect.
All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: Xxxxxxx X. Xxxx
00 Xxxx Xxxxxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxxxxx 00000
If to the Company: XTRA Corporation
00 Xxxxx Xxxxxx - 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Chair, Compensation Committee, and
the General Counsel
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective either on the date of delivery (in the case of delivery by hand),
or three business days after deposit into the mails (in the case of
delivery by mail).
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IN WITNESS WHEREOF, XTRA Corporation and Executive have each caused this
Agreement to be duly executed and delivered as of the date set forth above.
XTRA CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Chair, Compensation Committee
/s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx
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EXHIBIT A
Significant Transaction. For the purposes of this Agreement, a "Significant
Transaction" shall mean:
a. Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company in one or a series of transactions (but excluding any
reorganization, merger or consolidation or sale of assets with or to
the Company or any subsidiary of the Company, unless in connection
with such transaction there is also a Significant Transaction
involving the Company) (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the then outstanding shares of common stock of the
Company (the "Company Common Stock") and the then outstanding voting
securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities" immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
outstanding Company Voting Securities, as the case may be, (ii) no
individual, corporation, partnership, limited liability company, or
other entity, which term shall include a "group" (within the meaning
of section 13(d) of the Securities Exchange Act of 1934 (the "Act"),
excluding any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Business Combination,
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
b. Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
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