Contract
SETTLEMENT OF BENEFITS
UNDER PRE-409 SERP
1. Sale of AMID. Technitrol, Inc. (the "Company") and all active participants in the
Technitrol, Inc. Supplemental Retirement Plan Amended and Restated Effective
December 31, 2004 (the "pre-409A SERP") as of the date of this Agreement (i.e., Xxxxx
Xxxxx, Xxxxxxx X. XxXxxxx, Xxxx X. Xxxxx, Xxxxx X. Xxxxxx III, and Xxxxx X.
Xxxxxx)(the "Active Participants") agree that if the closing of a sale of the AMI Doduco
business occurs before January 1, 2012 (a "Sale"), such Sale shall result in the
consequences described below with respect to the pre-409A SERP. For this purpose, a
"sale of the AMI Doduco business" means a direct or indirect sale, in one transaction or a
series of related transactions, of all or substantially all the assets or shares of any of the
following: (a) AMI Doduco, Inc., (b) AMI Doduco GmbH and AMI Doduco Espana,
S.L. (i.e., AMI Doduco Europe), or (c) AMI Doduco GmbH, AMI Doduco Espana, S.L.
and AMI Doduco Tianjin Electrical Contacts Manufacturing Co., Ltd. (i.e., AMI Doduco
Europe and China)).
2. Termination of Pre-409A SERP; Payments.
a. Immediately upon the Sale, the Company will cause the payment of benefits to
the participants of the pre-409A SERP as set forth in section 3 below to be made
within 10 days of the Sale. The Company will also terminate the pre-409A SERP
at that time.
b. Payments described in Sections 3(b), (c) and (d) will be made in two parts: (i) an
amount from the pre-409A SERP representing the benefit payable upon plan
termination in the ordinary course (i.e., in the absence of a Change in Control
('CIC")), and (ii) a separate but contemporaneous cash amount sufficient (when
added to the first amount) to achieve the aggregate economics below described. If
and to the extent the payments are made within the time frame as described
herein, the Active Participants agree not to assert that a CIC or Potential Change
in Control has occurred for purposes of the pre-409A SERP, the Company's
equity plans or any other arrangements and agree that the amounts herein
described will constitute full satisfaction of their rights under or with respect to
the pre-409A SERP in connection with any Sale.
3. Payment of Benefits Upon A Sale.
a. Non-Active Participants as of the date of this Agreement. Non-active participants
as of the date of this Agreement will receive a lump sum cash payment of their
accumulated benefit obligations under the pre-409A SERP. Such non-active
participants will not receive tax-gross ups or other cash amounts. See Exhibit 1
for an estimate of the benefit payments to non-active participants.
b. Active Participants (other than Xxx Xxxxxx and Xxxxx Xxxxx) as of the date of this
Agreement. Xxxxxxx X. XxXxxxx, Xxxx X. Xxxxx and Xxxxx X. Xxxxxx will each
receive a lump sum cash payment of the benefits they would be entitled to receive
under the pre-409A SERP if the Sale were a CIC, but excluding any tax-gross ups
or other cash amounts. In consideration for the Company's agreement to pay this
amount in the circumstance herein described, these Active Participants will sign a
written waiver of, the tax gross-up benefits that they would otherwise be entitled
to receive from the pre-409A SERP upon a CIC. See Exhibit 1 for an estimate of
the benefit payments to these Active Participants.
c. Xxx Xxxxxx. Whether active or not as of the date of Sale, Xxx will receive an
amount sufficient, on an after-tax basis (assuming all federal, state and local taxes
at the then highest marginal rate), to then pay the "applicable annuity cost." For
this purpose, "applicable annuity cost" means (a) the cost of then purchasing an
annuity from an insurance company reasonably acceptable to Xxx with a Standard
and Poor's Financial Strength Rating of AAA, which annuity would pay $425,000
annually for the joint lives of Xxx and his current spouse and, following the death
of either, $212,500 annually for the remainder of the survivor's life, reduced by
(b) $1,283,113. In consideration for the Company's agreement to pay this amount
in the circumstance herein described, Xxx will sign a written waiver of the benefits
that he would otherwise be entitled to receive from the pre-409A SERP upon a
CIC. An estimate of the cost of Jim's proposed SERP benefits is set forth in
Exhibit 1.
d. Xxxxx Xxxxx. Whether active or not as of the date of Sale, Grace will receive an
amount sufficient, on an after-tax basis, to then purchase an annuity from an
insurance company reasonably acceptable to Grace or her designee with a
Standard and Poor's Financial Strength Rating of AAA, which annuity would pay
$31,575 per year in the form of a single life obligation. In consideration for the
Company's agreement to pay this amount in the circumstance herein described,
Grace will sign a written waiver of the benefits that she would otherwise be
entitled to receive from the pre-409A SERP upon a CIC. An estimate of the cost
of Grace's proposed pre-409A SERP benefits is set forth in Exhibit 1.
e. No Prohibition Against Pre-Sale Retirement. For avoidance of doubt, this
Agreement will not prevent Xx. Xxxxxx and/or Xx. Xxxxx from commencing
receipt of monthly benefits under the pre-409A SERP prior to a Sale and
following their respective retirements. If a Sale occurs after either has
commenced receipt of his or her monthly benefits under the pre-409A SERP in
the ordinary course, Sections 2 and 3 of this Agreement will still apply. Their
remaining benefits under the pre-409A SERP would then be cashed out upon
termination of that plan on a basis consistent with the treatment of other retirees,
and the payment received under the pre-409A SERP upon plan termination, plus
the additional payment described in Section 2(b)(ii) will, in the aggregate, provide
them with the amount described in Section 3(c) or 3(d), as applicable.
4. No Sale of AMID. If a Sale does not occur, then:
a. the pre-409A SERP will continue in effect and will pay benefits to participants as
provided for under the terms of the SERP (all terms and provisions of the pre-
409A SERP shall remain in effect); and
b. the Company can, but need not, terminate the SERP at any time after December
31, 2011 for any reason or no reason, and can upon such termination distribute the
unpaid accrued benefits of participants in accordance with the terms of the pre-
409A SERP. In the absence of a Sale, the Company will not terminate the pre-
409A SERP prior to January 1, 2012.
5. Impact of Other Transactions. The Active Participants agree and acknowledge that
Section 6.1 of the pre-409A SERP has no further application to any person and that the
remainder of Article VI (regarding benefits payable upon a Change in Control) of the pre-
409A SERP will only apply to them if they are employed by the Company at the time of
the relevant Change in Control transaction. If benefits become payable to an Active
Participant under Article VI of the pre-409A SERP before the occurrence of a Sale,
Sections 2 and 3 of this Agreement will not apply to that Active Participant.
6. Effect on Rabbi Trust. The parties agree that no additional rabbi trust funding will be
required solely in anticipation of the Sale. Provided that the Company has not breached
its obligations as set forth in this Agreement, the Active Participants agree not to assert
that any steps taken in anticipation or contemplation of the Sale gives rise to a "Potential
Change in Control" under the terms of the rabbi trust maintained in connection with the
pre-409A SERP, and that they will not make any communication to the trustee of that
rabbi trust in connection with, or in anticipation of, the Sale except as specifically
authorized and directed by the Board of Directors of the Company (the "Board").
7. Section 409A. The parties intend and believe that payments under Sections 2 and 3 of
this Agreement will be exempt from Section 409A of the Internal Revenue Code of 1986,
as amended (the "Code"). Specifically, (a) the amounts described in Section 2(b)(i) will
be exempt as payments under a grandfathered plan, and (b) the amounts described in
Sections 2(b)(ii) will be exempt as short term deferrals payable only following the lapse
of a substantial risk of forfeiture. Nonetheless, if despite the parties' intent, an amount
payable under Section 2 or 3 of this Agreement is determined to be subject to additional
federal income taxes, including interest and penalties, under Section 409A of the Code,
the Company shall indemnify the participant for all such additional taxes on that amount,
including interest and penalties, within 10 days of such determination. For purposes of
this indemnification, an amount will be determined to be subject to additional federal
income taxes, including interest and penalties, under Section 409A of the Code upon the
earlier of (x) a final determination by the Internal Revenue Service addressed to the
participant or his beneficiary which is not appealed to the courts, or (y) a final
determination by the United States Tax Court or any other federal court affirming any
such determination by the Internal Revenue Service.
8. Xx. Xxxxxx'x Retirement.
a. Xx. Xxxxxx agrees that he will voluntarily retire from employment by the
Company, as an officer of the Company, as a member of the Board and as an
employee, officer or director of any affiliate of the Company on the earliest to
occur of: (x) 30 days after the Board provides written notice to Xx. Xxxxxx of its
hiring of a new Chief Executive Officer ("CEO")(provided that written notice for
this purpose will include the issuance of a press release announcing the Board's
hiring of such new CEO), (y) March 31, 2010, or (z) such date between (and
inclusive of) December 31, 2009 and March 31, 2010 as requested by the Board
with 30 days advance written notice. Xx. Xxxxxx agrees and acknowledges that,
upon such retirement, the Company and its affiliates will then have no further
obligations to him other than the following:
i. base salary and, subject to the terms of the applicable plans, employee
benefits through the later of the date of retirement or December 31, 2009,
with such continued salary payable at the Company's ordinary payroll
interval;
ii. reimbursement in accordance with Company policy for any previously
unreimbursed business expenses incurred prior to his retirement;
iii. any bonus due to him under the Company's Short Term Incentive Plan
with respect to the 2009 calendar year (which bonus is guaranteed to be
not less than $267,000 and will be paid no later than December 31, 2009),
to the extent not previously paid;
iv. accelerated vesting of the 17,800 restricted shares now held by him, if
those shares have not otherwise vested by the date of his retirement;
v. continuation of coverage under the Company's group health insurance
plan until his death at a monthly cost to Xx. Xxxxxx equal to the actual
cost of such coverage;
vi. vested benefits under the company's qualified and non-qualified
retirement plans, payable in accordance with the terms of those plans (and,
in the case of his benefits under the pre-409A SERP, in accordance with
the terms of this Agreement);
vii. his rights under this Agreement;
viii. title to the automobile currently leased for him by the Company, which
title will be delivered to him within 30 days following his retirement (but
no later than March 15, 2010)(prior to the delivery of such title, Xx.
Xxxxxx will continue to have use of the automobile at the expense of the
Company);
ix. to the extent not previously granted, a grant of 15,000 fully vested shares
in respect of his final annual equity incentive award, plus an amount in
cash sufficient to satisfy all tax obligations arising from that grant and the
payment of that cash amount (which amount will be determined in a
manner consistent with Section 5(b) of the form of Amended and Restated
Restricted Stock Plan II attached to the Proxy Statement for the
Company's May 15, 2008 Annual Shareholders Meeting (the "RSP II")).
Such shares and cash will be awarded to Xx. Xxxxxx immediately prior to
his retirement, but no later than December 31, 2009; and
x. a grant of up to 12,000 additional fully vested shares (with the actual
number of shares granted, if any, to be determined by the Board in its
absolute discretion) in respect of his final long term equity incentive
award, plus an amount in cash sufficient to satisfy all tax obligations
arising from that grant and the payment of that cash amount (which
amount will be determined in a manner consistent with Section 5(b) of the
RSP II). Such shares and cash, if any, will be awarded to Xx. Xxxxxx
immediately prior to his retirement, but no later than December 31, 2009.
Xx. Xxxxxx agrees further that he will, within 30 days following his retirement,
execute and deliver (and will not revoke) a valid general release of claims in form
and content reasonably acceptable to him and the Company pursuant to which he
will release the Company and its affiliates from all claims relating to his
employment or otherwise (except the Company's continuing obligations
hereunder and the Company's indemnification obligations under Section 4(v)(a)
of that certain letter agreement between Xx. Xxxxxx and the Company dated
April 25, 2007, as amended on February 15, 2008 (the "Letter Agreement")). Xx.
Xxxxxx agrees that if he breaches his obligations under the preceding sentence, in
addition to any other relief to which the Company may then be entitled, the
Company will have no further obligations to him under this Agreement (provided
that this sentence will not interfere with Xx. Xxxxxx'x right to receive his vested
normal retirement benefits under the Company's qualified and non-qualified plans
that are payable in the ordinary course).
b. Except as otherwise herein provided, until the minute immediately preceding his
retirement in accordance with Section 8(a), above, the Letter Agreement will
remain in effect. Xx. Xxxxxx agrees that neither this Agreement, the Company's
search for a new CEO, nor the Company's selection or hiring of a new CEO will
constitute "Good Reason" as that term is defined in the Letter Agreement. Upon
and following his retirement, Sections 4(v)(a), 8, 9, 10, 12, 13C and 13D of the
Letter Agreement will remain in effect; the remainder of the Letter Agreement
will terminate upon such retirement.
c. Reimbursements or in-kind benefits provided hereunder will be subject to the
requirements of Treas. Reg. 1.409A-3(i)(1)(iv)(A)(3), (4) and (5).
d. The foregoing notwithstanding, if after the date hereof and prior to Xx. Xxxxxx'x
retirement in accordance with Section 8(a), above, the Company experiences a
Control Event (as defined below), this Section 8 will be null and void and the
Letter Agreement will continue in effect in accordance with its terms. For this
purpose, a "Control Event" means the completion of a "change in control event"
described in Treas. Reg. SS 1.409A-3(i)(5)(v), (vi) or (vii).
9. Acknowledgements of Xx. Xxxxxx. For avoidance of doubt, Xx. Xxxxxx acknowledges
and agrees that (i) the terms of the pre-409A SERP and this Agreement are the complete
and exclusive expression of his rights with respect to any SERP benefit and the
provisions of the Letter Agreement relating to SERP rights have been superseded, (ii) this
Agreement, the pre-409A SERP and the Letter Agreement are the complete and exclusive
expression of his rights to compensation and benefits from the Company upon a change
in control (however defined) or upon a retirement or other termination of employment
and there are no other agreements, whether or not written, regarding such matters.
10. Retirement of Xx. Xxxxx. Xx. Xxxxx will retire contemporaneously with Xx. Xxxxxx.
Provided that Xx. Xxxxx remains continuously employed through the date of Xx.
Xxxxxx'x retirement (as described above in Section 8(a)), at that time (i) all the restricted
shares she then holds will vest, and (ii) she will be entitled to continuation of group
health coverage on the same basis as described above in Section 8(a)(v).
11. Miscellaneous.
a. Entire Agreement; Amendment. This Agreement represents the entire agreement
between the parties hereto relating to the subject matter hereof, and supersedes all
prior and contemporaneous discussions, agreements and understanding of every
nature related thereto. This Agreement may not be modified except by an
agreement in writing signed by each of the parties affected by the modification.
b. Agreement Binding on Successors and Heirs. This Agreement will be binding on,
and inure to the benefit of, the respective successors, executors, administrators
and heirs of the parties hereto. No right to payment in accordance with this
Agreement may be pledged, assigned or otherwise transferred.
c. Governing Law. This Agreement will be governed by, and enforced in
accordance with, the laws of the Commonwealth of Pennsylvania, without regard
to the application of the principles of conflicts of laws.
d. Headings Descriptive. The headings of sections and paragraphs of this
Agreement are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
e. Interpretation. This Agreement was drafted collaboratively. Accordingly, in
construing this Agreement, no presumption against the drafter will be applied
against any party.
f. Voluntary Nature of Agreement. Each Active Participant acknowledges that he or
she is entering into this Agreement voluntarily, after having had a reasonable
opportunity to review this Agreement with his or her attorney.
[signature page follows]
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized representative, and each Active Participant has executed this Agreement, on
the date indicated below, respectively.
TECHNITROL, INC.
By: /s/ Xxxxx X. Xxxxxx III
Title: CEO
Date: 9/24/09
XXXXX XXXXX
/s/ Xxxxx Xxxxx
Date: 9/23/09
XXXXXXX X. XxXXXXX
/s/ Xxxxxxx X. XxXxxxx
Date: 9/24/09
XXXX X. XXXXX
/s/ Xxxx X. Xxxxx
Date: 9/22/09
XXXXX X. XXXXXX III
/s/ Xxxxx X. Xxxxxx III
Date: 9/24/09
XXXXX X. XXXXXX
/s/ Xxxxx X. Xxxxxx
Date: 9/22/09
