CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS Change in Control Severance Agreement ("Agreement") is made
effective as of the 1st day of April, 1998 (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
FullName~ ("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.
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) 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
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CHANGE IN CONTROL SEVERANCE AGREEMENT
(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 transaction.
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
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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 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.
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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 prerequisites 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 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 owned, directly or
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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 Effective Date
and end on March 31, 2000. However, if a Change in Control shall have
occurred prior to March 31, 2000, the Term of this Agreement shall be
automatically extended for a period of thirty-six (36) complete calendar
months commencing with the month immediately following the month in which the
Change in Control occurs. Moreover, if March 31, 2000 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
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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 can not be terminated by the Company prior to the
expiration of its Term except 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 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
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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 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
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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 a
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 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
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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 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 this Agreement all federal,
State, city, or other taxes as may be required pursuant to any law or
governmental regulation or ruling.
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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)(1) 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 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.
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CHANGE IN CONTROL SEVERANCE AGREEMENT
[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 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 --
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CHANGE IN CONTROL SEVERANCE AGREEMENT
(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 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
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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 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
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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., 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
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CHANGE IN CONTROL SEVERANCE AGREEMENT
reporters. Judgment upon any award rendered in any such arbitration
proceeding may be entered by any federal or state court having jurisdiction.
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 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.
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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 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
representation, 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
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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.
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CHANGE IN CONTROL SEVERANCE AGREEMENT
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: ____________________________
Xxx X. Xxxxxx
Vice Chairman of the Board
EXECUTIVE
By: ____________________________
FullName~
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CHANGE IN CONTROL SEVERANCE AGREEMENT
