EXHIBIT 10.40
SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of December 3, 1997, is made by and
between XXXXX XXXXXX INCORPORATED, a Delaware corporation (the "Company"), and
XXXXXXX X. XXXX (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to xxxxxx the continued employment of key
management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's 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, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definitions of capitalized terms used in
this Agreement are provided in the last Section hereof.
2. Term of Agreement. Subject to the provisions of Section
12.2 hereof, the Term of this Agreement shall commence on the date hereof and
shall continue in effect through December 31, 1999; provided, however, that
commencing on January 1, 1998 and each January 1 thereafter (an "Extension
Date"), the Term shall automatically be extended for one additional year (i.e.,
resulting in a two-year Term on the Extension Date) unless, not later than
September 30 of the year preceding the Extension Date, the Company or the
Executive shall have given notice not to extend the Term; and further provided,
however, that if a Change in Control shall have occurred during the Term, the
Term shall expire no earlier than twenty-four (24) months beyond the month in
which such Change in Control occurred.
3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the Severance Payments and
the other payments and benefits described herein. Except as provided in Section
9.1 hereof, no Severance Payments shall be payable under this Agreement unless
there shall have been (or, under the terms of the second sentence of Section 6.1
hereof, there shall be deemed to have been) a termination of the Executive's
employment with the Company following a Change in Control and during the Term.
This Agreement shall not be construed as creating an express or implied contract
of employment and, except as otherwise agreed in writing between the Executive
and the Company, the Executive shall not have any right to be retained in the
employ of the Company.
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4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any
reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental illness,
the Company shall pay the Executive's full 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 for
Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
the Executive's full salary to the Executive through the Date of Termination at
the rate in effect immediately prior to the Date of Termination or, if higher,
the rate in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of the Company's compensation and benefit plans, programs or arrangements
as in effect immediately prior to the Date of Termination or, if more favorable
to the Executive, as in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
to the Executive the Executive's normal 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
retirement, insurance and other compensation or benefit plans, programs and
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
occurrence of the first event or circumstance constituting Good Reason.
5.4 Upon the occurrence of a Change in Control all options to
acquire shares of Company stock, all shares of restricted Company stock and all
other equity or phantom equity incentives held by the Executive under any plan
of the Company (including, but not limited to, the Company's 1995 Stock Award
Plan (and the Stock Matching Programs thereunder), 1993 Stock Option Plan, 1993
Stock Bonus Plan and 1991 Stock Bonus Plan) shall become immediately vested,
exercisable and nonforfeitable and all conditions thereof (including, but not
limited to, any required holding periods) shall be deemed to have been
satisfied.
6. Severance Payments.
6.1 If the Executive's employment is terminated following a
Change in Control and during the Term, other than (A) by the Company for Cause,
(B) by reason of death or Disability, or (C) by the Executive without Good
Reason, then, the Company shall pay the Executive the amounts, and provide the
Executive the benefits, described in this Section 6.1 ("Severance Payments") and
Section 6.2, in addition to any payments and benefits to which the Executive is
entitled under Section 5 hereof. For purposes of this
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Agreement, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason, if (i) the Executive's employment is terminated by the Company
without Cause prior to a Change in Control (whether or not a Change in Control
ever occurs) and such termination was at the request or direction of a Person
who has entered into an agreement with the Company the consummation of which
would constitute a Change in Control, (ii) the Executive terminates his
employment for Good Reason prior to a Change in Control (whether or not a Change
in Control ever occurs) and the circumstance or event which constitutes Good
Reason occurs at the request or direction of such Person described in clause
(i), or (iii) the Executive's employment is terminated by the Company without
Cause or by the Executive for Good Reason and such termination or the
circumstance or event which constitutes Good Reason is otherwise in connection
with or in anticipation of a Change in Control (whether or not a Change in
Control ever occurs). For purposes of any determination regarding the
applicability of the immediately preceding sentence, any position taken by the
Executive shall be presumed to be correct unless the Company establishes to the
Committee by clear and convincing evidence that such position is not correct.
(A) In lieu of any further salary payments
to the Executive for periods subsequent to the Date of Termination and
in lieu of any severance benefit otherwise payable to the Executive,
the Company shall pay to the Executive a lump sum severance payment, in
cash, equal to three times the sum of (i) the Executive's base salary
as in effect immediately prior to the Date of Termination or, if
higher, in effect immediately prior to the first occurrence of an event
or circumstance constituting Good Reason, and (ii) the average annual
bonus earned by the Executive pursuant to any annual bonus or incentive
plan maintained by the Company in respect of the three fiscal years
ending immediately prior to the fiscal year in which occurs the Date of
Termination or, if higher, immediately prior to the fiscal year in
which occurs the first event or circumstance constituting Good Reason;
provided, that if the Executive has not participated in an annual bonus
or incentive plan maintained by the Company for the entirety of such
three-year period, the amount referred to in this clause (ii) shall be
calculated using such lesser number of bonuses as have been actually
earned by the Executive in respect of such lesser period.
(B) For the thirty-six (36) month period
immediately following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents life, disability,
accident and health insurance benefits and perquisites (including, but
not limited to, executive life insurance, club memberships, financial
planning and tax preparation, annual physical examination and
charitable contributions), in each case, substantially similar to those
provided to the Executive and his dependents immediately prior to the
Date of Termination or, if more favorable to the Executive, those
provided to the Executive and his dependents immediately prior to the
first occurrence of an 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; provided, however, that,
unless the Executive consents to a different method (after taking into
account the effect of such method on the calculation of "parachute
payments" pursuant to Section 6.2 hereof), such health insurance
benefits shall be provided through a third-party insurer. Benefits
otherwise receivable by the Executive pursuant to this Section 6.1(B)
shall be reduced to the extent benefits of the same type are received
by or made available to the Executive 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
cost of such benefits to the Executive over such cost immediately prior
to the Date of Termination or, if more favorable to the Executive, the
first occurrence of an event or circumstance constituting Good Reason.
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(C) Notwithstanding any provision of the
Xxxxx Xxxxxx Incorporated 1995 Employee Annual Incentive Compensation
Plan (the "Annual Incentive Plan"), the Company shall pay to the
Executive a lump sum amount, in cash, equal to the sum of (i) any
unpaid incentive compensation which has been allocated or awarded to
the Executive for a completed fiscal year or other measuring period
preceding the Date of Termination under the Annual Incentive Plan and
which, as of the Date of Termination, is contingent only upon the
continued employment of the Executive to a subsequent date, and (ii) a
pro rata portion to the Date of Termination of the aggregate value of
all contingent incentive compensation awards to the Executive for all
then uncompleted periods under the Annual Incentive Plan, calculated as
to each such award by multiplying the award that the Executive would
have earned on the last day of the performance award period, assuming
the achievement, at the expected value target level, of the individual
and corporate performance goals established with respect to such award,
by the fraction obtained by dividing the number of full months and any
fractional portion of a month during such performance award period
through the Date of Termination by the total number of months contained
in such performance award period; provided, however, that if such
termination of employment occurs during the same year in which the
Change in control occurs, the pro-rata bonus payment referred to in
clause (ii) above shall be offset by any payments received under the
Annual Incentive Plan in connection with such Change in Control.
(D) In addition to the retirement benefits
to which the Executive is entitled under the Company's Thrift Plan (the
"Thrift Plan") and the Company's Supplemental Retirement Plan (the
"SRP"), the Company shall pay the Executive a lump sum amount, in cash,
equal to the present value of the employer-provided contributions,
deferrals and allocations the Executive would have received had he
continued to participate, after the Date of Termination, in the Thrift
Plan and the SRP for three (3) additional years, assuming for this
purpose that (i) the Executive earned compensation for purposes of the
Thrift Plan and SRP during such three-year period the amount used to
calculate the Executive's severance payment under subparagraph (A) of
this Section 6.1, and (ii) the percentages of contributions, deferrals
and allocations made under the Thrift Plan and the SRP by or on behalf
of the Executive during such three-year period are the same percentages
of contributions, deferrals and allocations in effect on the date of
the Change in Control or the Date of Termination, whichever is more
favorable to the Executive.
(E) If the Executive would have become
entitled to benefits under the Company's post-retirement health care or
life insurance plans, 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, had the Executive's employment terminated at
any time during the period of thirty-six (36) months after the Date of
Termination, the Company shall provide such post-retirement health care
or life insurance benefits to the Executive and the Executive's
dependents commencing on the later of (i) the date on which such
coverage would have first become available and (ii) the date on which
benefits described in subsection (B) of this Section 6.1 terminate.
(F) The Company shall provide the Executive
with outplacement services suitable to the Executive's position for a
period of three years or, if earlier, until the first acceptance by the
Executive of an offer of employment.
6.2 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any of the payments or benefits received or to be
received by the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a
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Change in Control or any Person affiliated with the Company or such Person)
(such payments or benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the "Total Payments") will be subject to the Excise Tax, the
Company shall pay to the Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of any
Excise Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the
Total Payments.
(B) For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amount of such Excise
Tax, (i) all of the Total Payments shall be treated as "parachute payments"
(within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of
tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected
by the accounting firm which was, immediately prior to the Change in Control,
the Company's independent auditor (the "Auditor"), such payments or benefits (in
whole or in part) do not constitute parachute payments, including by reason of
section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within
the meaning of section 280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of
the Base Amount 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 Gross-Up 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 Gross-Up 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 the date on which the Gross-Up Payment is
calculated for purposes of this Section 6.2), net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes.
(C) In the event that the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay to the Company,
within five (5) business days following the time that the amount of such
reduction in the Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the Executive,
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 Gross-Up
Payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with respect to such
excess) within five (5) business days following the time 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.
6.3 The payments provided in subsections (A), (C) and (D) of
Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as determined in
good faith by the Executive or, in the case of payments under Section 6.2
hereof, in accordance with Section 6.2 hereof, of the minimum
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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 the
thirtieth (30th) day after the Date of Termination. In the event that the amount
of the estimated payments exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company to the Executive,
payable on the fifth (5th) business day after demand by the Company (together
with interest at 120% of the rate provided in section 1274(b)(2)(B) of the
Code), but only to the extent such amount has not been paid by the Executive
pursuant to Section 6.2(C) above. At the time that payments are made under this
Agreement, the Company shall provide the Executive with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, the Auditor or other advisors
or consultants (and any such opinions or advice which are in writing shall be
attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees
and expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5) business
days after delivery of the Executive's written requests for payment accompanied
with such evidence of fees and expenses incurred as the Company reasonably may
require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific 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 under
the provision so indicated. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this
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Section 7.3), the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, the Date of Termination
shall be extended until the earlier of (i) the date on which the Term ends or
(ii) the date on which the dispute is finally resolved, either by mutual written
agreement of the parties or by a final judgment, order or decree of an
arbitrator or a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); provided, however, that the Date of Termination shall be
extended by a notice of dispute given by the Executive only if such notice is
given in good faith and the Executive pursues the resolution of such dispute
with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company shall
continue to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given or those plans in which the Executive was
participating immediately prior to the first occurrence of an event or
circumstance giving rise to the Notice of Termination, if more favorable to the
Executive, until the Date of Termination, as determined in accordance with
Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all
other amounts due under this Agreement (other than those due under Section 5.2
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment with the Company terminates during the Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by the Company pursuant to Sections 5, 6 or 7.4 hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 6.1(B) hereof but including (but not limited to) Section 7.4
hereof) shall not be reduced by any compensation earned by the Executive as the
result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company, or
otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will 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.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death of
the Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate.
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10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed, if
to the Executive, to the address inserted below the Executive's signature on the
final page hereof and, if to the Company, to the address set forth below, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:
To the Company:
0000 Xxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
11. Miscellaneous. Except as otherwise specifically provided
in Section 12.2 below, no provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by the Executive and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or of any lack of compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. This Agreement supersedes any other agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party; provided, however,
that this Agreement shall supersede any agreement setting forth the terms and
conditions of the Executive's employment with the Company only in the event that
the Executive's employment with the Company is terminated on or following a
Change in Control, by the Company other than for Cause or by the Executive other
than for Good Reason; and provided further that all agreements otherwise
superseded by this Agreement will be automatically reinstated with full force
and effect to the extent this Agreement is terminated or otherwise rendered
inapplicable or amended in accordance with Section 12.2 hereof. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Texas. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law and any
additional withholding to which the Executive has agreed. The obligations of the
Company and the Executive under this Agreement which by their nature may require
either partial or total performance after the expiration of the Term (including,
without limitation, those under Sections 6 and 7 hereof) shall survive such
expiration.
12. Validity; Pooling.
12.1 Validity. The invalidity or unenforceability of any
provision 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.
12.2 Pooling. In the event that (A) the Company is party to a
transaction which is otherwise intended to qualify for "pooling of interests"
accounting treatment, (B) such transaction constitutes a Change in Control
within the meaning of Section 15(G)(III) and (C) individuals who satisfy the
requirements in clauses (i) and (ii) below constitute more than two-thirds (2/3)
of the number of directors of the entity surviving such transaction or any
parent thereof, if any: individuals who (i) immediately prior to such
transaction constitute the Board and (ii) 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
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election contest relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company's
stockholders 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 then (a) this Agreement shall, to the extent
practicable, be interpreted so as to permit such accounting treatment, and (b)
to the extent that the application of clause (a) of this Section 12.2 does not
preserve the availability of such accounting treatment, then, to the extent that
any provision or combination of provisions of the Agreement disqualifies the
transaction as a "pooling" transaction (including, if applicable, the entire
Agreement), the Board shall have the right, by sending written notice to the
Executive prior to the Change in Control, to unilaterally amend (without the
consent of the Executive) such provision or provisions if and to the extent
necessary (including declaring such provision or provisions to be null and void
as of the date hereof) so that such transaction may be accounted for as a
"pooling of interests." All determinations under this Section 12.2 shall be made
by the Board prior to the Change in Control, based upon the advice of the
accounting firm whose opinion with respect to "pooling of interests" is required
as a condition to the consummation of such transaction.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Committee and shall be in
writing. Any denial by the Committee of a claim for benefits under this
Agreement shall be delivered to the Executive in writing within thirty (30) days
after written notice of the claim is provided to the Company in accordance with
Section 10 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 appeal to the Committee a
decision of the Committee within sixty (60) days after notification by the
Committee that the Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Houston, Texas in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to
seek specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2
hereof.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
9
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (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 7.1 hereof)
after a written demand for substantial performance is delivered to the Executive
by the Board, which demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed the Executive's
duties, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Committee by
clear and convincing evidence that Cause exists.
(G) A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) 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 20% 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 (III) below; or
(II) the following individuals cease for any
reason to constitute a majority of the number of directors
then serving: 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 relating to the election of
directors of the Company) whose appointment or election by the
Board or nomination for election by the Company's stockholders
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
(III) there is consummated a merger or
consolidation of the Company or any direct or indirect
subsidiary of the Company with any other corporation, 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
65% 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 (not including in
the securities Beneficially Owned by such Person any
securities acquired directly from the
10
Company or its Affiliates other than in connection with the
acquisition by the Company or its Affiliates of a business)
representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
(IV) the stockholders 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 by the Company 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 65% of the combined voting power of the
voting securities of which are owned by stockholders of the
Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "Committee" shall mean (i) the individuals (not fewer than
three in number) who, on the date six months before a Change in Control,
constitute the Compensation 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 six (6).
(J) "Company" shall mean Xxxxx Xxxxxx Incorporated and, except
in determining under Section 15(G) hereof whether or not any Change in Control
of the Company has occurred, shall include any successor to its business and/or
assets which assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(K) "Date of Termination" shall have the meaning set forth in
Section 7.2 hereof.
(L) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, 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, the Company shall have
given the Executive a Notice of Termination for Disability, and, 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.
(M) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(O) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(P) "Extension Date" shall have the meaning set forth in
Section 2 hereof.
11
(Q) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (treating all references in paragraphs (I)
through (VII) below to a "Change in Control" as references to a "Potential
Change in Control"), of any one of the following acts by the Company, or
failures by the Company to act, unless, in the case of any act or failure to act
described in paragraph (I), (V), (VI) or (VII) below, such act or failure to act
is corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as a senior
executive officer of the Company or a substantial adverse
alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the
Change in Control;
(II) a reduction by the Company in the
Executive's annual base salary as in effect on the date hereof
or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
senior executives of the Company and all senior executives of
any Person in control of the Company;
(III) the relocation of the Executive's
principal place of employment to a location more than 50 miles
from the Executive's principal place of employment immediately
prior to the Change in Control or the Company's requiring the
Executive to be based anywhere other than such principal place
of employment (or permitted relocation thereof) except for
required travel on the Company's business to an extent
substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Company to pay to
the Executive any portion of the Executive's current
compensation except pursuant to an across-the-board
compensation deferral similarly affecting all senior
executives of the Company and all senior executives of any
Person in control of the Company, or to pay to the Executive
any portion of an installment of deferred compensation under
any deferred compensation program of the Company, within seven
(7) days of the date such compensation is due;
(V) the failure by the Company to continue
in effect any compensation plan in which the Executive
participates immediately prior to the Change in Control which
is material to the Executive's total compensation, including
but not limited to the Company's 1993 Stock Option Plan, 1993
Employee Stock Bonus Plan, 1991 Employee Stock Bonus Plan,
1995 Stock Award Plan (and the 1995, 1996 and 1997 Stock
Matching Programs thereunder and any subsequent Stock Matching
Programs in which the Executive participates), 1987
Convertible Debenture Plan and 1995 Employee Annual Incentive
Compensation Plan or any substitute plans adopted prior to the
Change in Control, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has been made
with respect to such plan, or the failure by the Company to
continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount or timing of payment of
benefits provided and the level of the Executive's
participation relative to other participants, as existed
immediately prior to the Change in Control;
12
(VI) the failure by the Company to continue
to provide the Executive with benefits substantially similar
to those enjoyed by the Executive under any of the Company's
pension, savings, life insurance, medical, health and
accident, or disability plans in which the Executive was
participating immediately prior to the Change in Control
(except for across the board changes similarly affecting all
senior executives of the Company and all senior executives of
any Person in control of the Company), the taking of any other
action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the
Executive of any material fringe benefit or perquisite enjoyed
by the Executive at the time of the Change in Control, or the
failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is
entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect
at the time of the Change in Control; or
(VII) any purported termination of the
Executive's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
7.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or failure
to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Executive that Good Reason exists shall be
presumed to be correct unless the Company establishes to the Committee by clear
and convincing evidence that Good Reason does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth in
Section 6.2 hereof.
(S) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(T) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified 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 indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
(U) "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(I) the Company enters into an agreement,
the consummation of which would result in the occurrence of a
Change in Control;
(II) the Company or any Person publicly
announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control;
(III) any Person becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 15% or more of either the then outstanding shares
of common stock of the Company or the combined voting power of
the Company's then outstanding securities (not including in
the securities beneficially owned by such Person
13
any securities acquired directly from the Company or its
affiliates); or
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(V) "Retirement" shall, for purposes of Section 4 hereof, be
deemed the reason for the termination by the Executive of the Executive's
employment if such employment is terminated after completion of ten (10) years
of service with the Company and attainment of age fifty-five (55).
(W) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(X) "SRP" shall have the meaning set forth in Section 6.1
hereof.
(Y) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(Z) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(AA) "Thrift Plan" shall have the meaning set forth in Section
6.1 hereof.
(BB) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date above first written.
XXXXX XXXXXX INCORPORATED
By: /s/ Xxxx X. Xxxxx
---------------------------------
Name: Xxxx X. Xxxxx
Title: Chairman - Compensation Committee
of the Board of Directors
EXECUTIVE
/s/ Xxxxxxx X. Xxxx
-----------------------------------------
Xxxxxxx X. Xxxx
Address:
-----------------------------------------
-----------------------------------------
(Please print carefully)
14
AMENDMENT 1 TO SEVERANCE AGREEMENT
This Amendment 1 to Severance Agreement ("Amendment 1") is made and
entered into effective November 11, 1998, by and between XXXXX XXXXXX
INCORPORATED, A Delaware corporation (the "Company") and XXXXXXX X. XXXX (the
"Executive").
WHEREAS, the Company and the Executive desire to make certain changes
to that certain Severance Agreement dated as of December 3, 1997, by and between
the Company and the Executive (the "Severance Agreement"), to take into account
the recent Change in Control (as defined in the Severance Agreement) involving
Western Atlas Inc.;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the Company and the Executive hereby agree as
follows:
Term. The following shall be added to the end of Paragraph 2 of the
Severance Agreement:
"; and further provided however, that solely with respect to any rights
or claims of the Executive in connection with the Change in Control
brought about by the merger with Western Atlas, Inc. which occurred on
August 10, 1998, the Term shall be deemed to expire on September 1,
2000, but for all other purposes and other events of Change in Control
which may occur subsequent to August 10, 1998, this proviso shall have
no force or effect."
All capitalized terms in this Amendment 1 shall have the definition
ascribed to those terms in the Severance Agreement. The Severance Agreement
continues in full force and effect, except as amended hereby. This Amendment 1
may be executed in several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the same instrument.
EXECUTED effective the day and year first written above.
Company:
Xxxxx Xxxxxx Incorporated
By: /s/ Xxxx X. Xxxxx
----------------------------------------
Xxxx X. Xxxxx
Chairman-Compensation Committee
Of the Board of Directors
Executive:
/s/ Xxxxxxx X. Xxxx
-------------------------------------------
Xxxxxxx X. Xxxx
15
