EXHIBIT 10.5
January 1, 2002
CONFIDENTIAL
Dear:
Unitrin, Inc. (the "Company") considers you to be a valued employee of the
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Employer (as defined below). In recognition of the value of your continued
services to the Employer, the Company's shareholders and other relevant
constituencies, the Company proposes the following agreement (the "Agreement")
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to provide you with certain severance payments and benefits if your employment
terminates following a "Change in Control" (as defined below).
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ARTICLE I
DEFINITIONS
1.1 Definitions
Whenever used in this Agreement, the following capitalized terms shall have the
meanings set forth in this Section, certain other capitalized terms being
defined elsewhere in this Agreement:
(a) "Affiliate" shall have the meaning set forth in Rule 12b-2
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promulgated under Section 12 of the Exchange Act.
(b) "Annualized Compensation" shall mean your rate of annual base
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salary as in effect immediately prior to your Qualifying
Termination, without regard to any decrease in such salary
constituting an Enumerated Event.
(c) "Beneficial Owner" shall have the meaning ascribed to such term
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in Rule 13d-3 promulgated under the Exchange Act.
(d) "Board of Directors" shall mean the Board of Directors of the
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Company, or any successor thereto.
(e) A "Change in Control" shall be deemed to have occurred if
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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 any of its
Subsidiaries or Affiliates) representing 25% 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 (A)
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 of
Directors 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 of Directors or nomination for election by the Company's
shareholders was approved or recommended by a vote of at least
two-thirds 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 (A) a merger or consolidation
which results in the directors of the Company immediately prior
to such merger or consolidation continuing to constitute at
least a majority of the board of directors of the Company, the
surviving entity or any parent thereof or (B) 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 Company or any of its Subsidiaries or
Affiliates) representing 25% or more of the combined voting
power of the Company's then outstanding securities; or
(iv) the shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
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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 immediately following
which the individuals who comprise the Board of Directors
immediately prior thereto constitute at least a majority of the
board of directors of the entity to which such assets are sold or
disposed or any parent thereof.
(f) "Company" shall mean Unitrin, Inc., a Delaware corporation, and
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any successor as provided in Article IV.
(g) "Disability" shall mean a physical or mental condition entitling
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you to benefits under the applicable long-term disability plan of the
Company or any of its Subsidiaries or Affiliates, or if no such plan
exists, causing you to be unable to substantially perform your duties
with the Employer for at least 6 months in any 12-month period.
(h) Your "Employer" shall mean the Company or any Subsidiary or
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Affiliate of the Company by which you are employed.
(i) "Enumerated Event" shall mean the occurrence after any Change in
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Control, or prior to a Change in Control under the circumstances
described in clause (ii) of the second and third sentences of Section
2.1 hereof (treating all references in paragraphs (i) through (iv)
below to a "Change in Control" as references to a "Potential Change in
Control"), of any one or more of the following events without your
express written consent:
(i) a reduction in your base salary as in effect
immediately prior to the Change in Control, or a material
reduction in the compensation and benefit plans, arrangements,
policies and procedures, taken as a whole, provided to you from
those, taken as a whole, provided to you immediately prior to the
Change in Control;
(ii) a material reduction in your job authority and
responsibility;
(iii) the Employer requires you to change the location of
your job or office, so that you will be based at a location more
than thirty miles from the location of your job or office
immediately prior to the Change in Control;
(iv) a successor company fails or refuses to assume the
Company's obligations under this Agreement, as required by
Article IV hereof (and for purposes of a termination of your
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employment following an Enumerated Event described in this
subsection (iv), the date on which any such succession becomes
effective shall be deemed the Date of Termination); or
(v) any purported termination of your employment which is
not effected pursuant to the terms of Section 7.5 hereof.
(j) "ERISA" means the Employee Retirement Income Security Act of
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1974, as amended.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
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amended.
(l) "Just Cause" shall mean, with respect to a termination of your
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employment with the Employer, (a) fraud, misappropriation of or
intentional material damage to the property or business of the Company
(including its Subsidiaries and Affiliates), which in any such case is
materially injurious to the Company (including its Subsidiaries and
Affiliates), monetarily or otherwise, or (b) your conviction for the
commission of a felony.
(m) "Person" shall have the meaning given in Section 3(a)(9) of the
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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 or Affiliates, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
Subsidiaries or Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, (iv) a
corporation owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, (v) any individual, entity or group whose
ownership of securities of the Company is reported on Schedule 13G
pursuant to Rule 13d-1 promulgated under the Exchange Act (but only for
so long as such ownership is so reported) or (vi) Xxxxxxxxx Group LLC
or any successor in interest to such entity.
(n) A "Potential Change in Control" shall be deemed to occur in the
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event that (a) the Company enters into an agreement, the consummation
of which would result in a Change in Control, (b) the Company or any
Person publicly announces an intention to take or to consider taking
action which, if consummated, would constitute a Change in Control, (c)
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 any
securities acquired directly from the Company or any of its
Subsidiaries or Affiliates) or (d) the Board of Directors adopts a
resolution to the effect that, for purposes of this Plan, a Potential
Change in Control has occurred.
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(o) "Qualifying Termination" shall mean a termination of employment
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pursuant to Section 2.1 entitling you to a Severance Payment pursuant
to the terms of this Agreement.
(p) "Severance Payment" shall mean the payment described in
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Section 2.2.
(q) "Subsidiary" shall mean any entity more than 50% of the voting
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securities of which are Beneficially Owned by the Company.
ARTICLE II
SEVERANCE PAYMENTS
2.1 Right to Severance Payment
You shall be entitled to receive a Severance Payment from the Company in the
amount provided in Section 2.2 if (x) there has been a Change in Control, (y)
you are an active employee at the time of the Change in Control, and (z) within
two years from and including the date of the Change in Control, your employment
is terminated by the Employer for any reason (other than Just Cause or your
death or Disability), or you terminate your employment for any reason. In
addition, if prior to a Change in Control (i) your employment is terminated by
the Employer for any reason (other than Just Cause or your death or Disability)
or (ii) you terminate your employment following the occurrence of any Enumerated
Event, and you reasonably demonstrate that such termination or Enumerated Event,
as the case may be, (a) occurred at the request of a Person who has indicated an
intention or taken steps reasonably calculated to effect a Change in Control or
(b) otherwise occurred in connection with, or in anticipation of, a Change in
Control (whether or not a Change in Control actually occurs), then for all
purposes of this Agreement the termination of your employment shall be deemed to
have occurred immediately following a Change in Control. There shall be an
irrebuttable presumption that (i) if your employment is terminated by the
Employer for any reason (other than Just Cause or your death or Disability)
within ninety (90) calendar days prior to the date of a Change in Control, or
(ii) if you terminate your employment following the occurrence of an Enumerated
Event which occurs within ninety (90) calendar days prior to the date of a
Change in Control, you will have made (in either case (i) or (ii)) the showing
required by the preceding sentence. For purposes of subclause (y) above, you
will still be considered to be an active employee if you are on sick leave,
military leave or any other leave of absence approved by the Employer.
2.2 Amount of Severance Payment
(a) If you become entitled to a Severance Payment under this
Agreement, the Company shall pay to you a lump sum payment equal to
[2][3] times one year's Annualized Compensation.
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(b) The Severance Payment otherwise calculated under this Section 2.2
shall be reduced (but not below zero) by the amount of cash
severance-type benefits to which you may be entitled pursuant to any
other severance plan, agreement, policy or program of the Company or
any of its Subsidiaries or Affiliates. Without limiting other payments
which would not constitute "cash severance-type benefits" hereunder,
any cash settlement of stock options, accelerated vesting of stock
options and retirement, pension and other similar benefits shall not
constitute "cash severance-type benefits" for purposes of this Section
2.2(b).
2.3 Gross-Up for Excise Taxes
(a) In the event that any payment or benefit (within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code")), to you or for your benefit paid or payable or
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distributed or distributable pursuant to the terms of this Agreement or
otherwise in connection with, or arising out of, your employment with
the Company or any of its Subsidiaries or Affiliates or a Change in
Control (a "Payment" or "Payments"), would be subject to the excise tax
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imposed by Section 4999 of the Code or any interest or penalties are
incurred by you with respect to such excise tax (such excise tax,
together with any such interest and penalties, collectively, the
"Excise Tax"), then the Company shall pay to you an additional payment
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(a "Gross-Up Payment") in an amount such that after payment by you of
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all taxes (including any interest or penalties imposed with respect to
such taxes and the Excise Tax (other than interest and penalties
imposed by reason of your failure to file timely a tax return or pay
taxes shown due on your return) and after taking into account the phase
out of itemized deductions and personal exemptions attributable to the
Gross-Up Payment), including any Excise Tax imposed upon the Gross-Up
Payment, you retain an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) An initial determination as to whether a Gross-Up Payment is
required pursuant to this Agreement and the amount of such Gross-Up
Payment shall be made at the Company's expense by an accounting firm
appointed by the Company prior to the Change in Control (the
"Accounting Firm"). The Accounting Firm shall provide its determination
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(the "Determination"), together with detailed supporting calculations
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and documentation to the Company and you within fifteen (15) calendar
days of the date on which your right to a Severance Payment hereunder
was triggered (if requested at that time by the Company or you) or such
other time as requested by the Company or by you (in either case
provided that you believe in good faith that any of the Payments may be
subject to the Excise Tax); provided that if the Accounting Firm
determines that no Excise Tax is payable by you with respect to a
Payment or Payments, it shall furnish you with an opinion reasonably
acceptable to you that no Excise Tax will be imposed with respect to
any such Payment or Payments. Within ten (10) calendar days of the
delivery of the Determination to you, you shall have the right to
dispute the Determination (the "Dispute"). The Gross-Up Payment, if
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any, as determined
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pursuant to this Section 2.3(b) shall be paid by the Company to you
within five (5) calendar days of the receipt of the Accounting Firm's
Determination. The existence of any Dispute shall not in any way affect
your right to receive the Gross-Up Payment, if any, in accordance with
the Determination. If there is no Dispute, the Determination shall be
binding, final and conclusive upon the Company and you, subject to the
application of Section 2.3(d).
(c) For purposes of determining whether any of the Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all of
the 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 you and selected
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by the Accounting Firm, such payments or benefits (in whole or in part)
do not constitute parachute payments, including by reason of section
280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within
the meaning of section 280G(b)(l) of the Code shall be treated as
subject to the Excise Tax unless, in the opinion of Tax Counsel, such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of
section 280G(b)(4)(B) of the Code) in excess of the Base Amount (as
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 Accounting Firm 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, you 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 your residence on the Date of
Termination (or if there is no such date, then the date on which the
Gross-Up Payment is calculated for purposes of this Section 2.3), net
of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
(d) As a result of the uncertainty in the application of Sections
4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a
portion thereof) will be paid which should not have been paid (an
"Excess Payment") or a Gross-Up Payment (or a portion thereof) which
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should have been paid will not have been paid (an "Underpayment"). An
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Underpayment shall be deemed to have occurred (i) upon notice (formal
or informal) to you from any governmental taxing authority that your
tax liability (whether in respect of your current taxable year or in
respect of any prior taxable year) may be increased by reason of the
imposition of the Excise Tax on a Payment or Payments with respect to
which the Company has failed to make a sufficient Gross-Up Payment,
(ii) upon a determination by a court, (iii) by reason of determination
by the Company (which shall include the position taken by the Company,
together with its consolidated group, on its federal income tax return)
or (iv) upon the resolution of any Dispute to your satisfaction. If an
Underpayment occurs, you shall promptly notify the Company
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and the Company shall promptly, but in any event at least ten (10)
calendar days prior to the date on which the applicable government
taxing authority has requested payment, pay to you an additional
Gross-Up Payment equal to the amount of the Underpayment plus any
interest and penalties (other than interest and penalties imposed by
reason of your failure to file timely a tax return or pay taxes shown
due on your return) imposed on the Underpayment. An Excess Payment
shall be deemed to have occurred upon a "Final Determination" (as
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defined below) that the Excise Tax will not be imposed upon a Payment
Payments (or portion thereof) with respect to which you had previously
received a Gross-Up Payment. A "Final Determination" shall be deemed to
have occurred when you have received from the applicable government
taxing authority a refund of taxes or other reduction in your tax
liability by reason of the Excise Payment and upon either (x) the date
a determination is made by, or an agreement is entered into with, the
applicable governmental taxing authority which finally and conclusively
binds you and such taxing authority, or in the event that a claim is
brought before a court of competent jurisdiction, the date upon which a
final determination has been made by such court and either all appeals
have been taken and finally resolved or the time for all appeals has
expired or (y) the statute of limitations with respect to your
applicable tax return has expired. If an Excess Payment is determined
to have been made, the amount of the Excess Payment shall be treated as
a loan by the Company to you and you shall pay to the Company on demand
(but not less than ten (10) calendar days after the determination of
such Excess Payment and written notice has been delivered to you) the
amount of the Excess Payment plus interest at an annual rate equal to
the Applicable Federal Rate provided for in Section 1274(d) of the Code
from the date the Gross-Up Payment (to which the Excess Payment
relates) was paid to you until the date of repayment to the Company.
(e) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Determination, an Excise
Tax will be imposed on any Payment or Payments, the Company shall pay
to the applicable government taxing authorities, as Excise Tax
withholding, the amount of the Excise Tax that the Company has actually
withheld from the Payment or Payments.
2.4 No Duty of Mitigation
The Company acknowledges that it would be very difficult and generally
impracticable to determine your ability to, or extent to which you may, mitigate
any damages or injuries you may incur by reason of the Change in Control. The
Company has taken this into account in entering into this Agreement and,
accordingly, the Company acknowledges and agrees that you shall have no duty to
mitigate any such damages and that you shall be entitled to receive your entire
Severance Payment regardless of any income which you may receive from other
sources following your termination after any Change in Control.
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2.5 Time of Severance Payment
The Severance Payment to which you are entitled shall be paid to you, in cash
and in full, not later than ten (10) calendar days after the termination of your
employment. If you should die before all amounts payable to you have been paid,
such unpaid amounts shall be paid to your beneficiary under this Agreement or,
if you have not designated such a beneficiary in writing to the Company, to the
personal representative(s) of your estate.
2.6 Life and Health Insurance Coverage
If you are entitled to receive a Severance Payment under Section 2.1, the
Company shall also provide you with the following additional benefits:
(a) Life insurance coverage for you and your dependents having a face
amount at least equal to the greater of (i) the amount in effect for
you (in your case) and/or your dependents (in the case of your
dependents) immediately prior to the Change in Control, or (ii) the
amount in effect for you (in your case) and/or your dependents (in the
case of your dependents) immediately prior to the Date of Termination,
such coverage to be provided under the same plan or plans under which
you (in your case) or your dependents (in the case of your dependents)
were covered immediately prior to the Change in Control (or Date of
Termination, as applicable) or substantially similar plan(s)
established by the Company or any of its Subsidiaries or Affiliates
thereafter, and at no greater cost to you (in your case) or your
dependents (in the case of your dependents) than was imposed pursuant
to the plan(s) under which you (in your case) and/or your dependents
(in the case of your dependents) were covered immediately prior to the
Change in Control (or Date of Termination, as applicable). This
coverage will continue for the period hereinafter provided.
(b) Health insurance coverage (including any dental coverage) for you
and your dependents under the same plan or plans under which you were
covered immediately prior to the Change in Control (or, if more
favorable, immediately prior to the Date of Termination) or
substantially similar plan(s) established by the Company or any of its
Subsidiaries or Affiliates thereafter, and at no greater cost to you
(in your case) or your dependents (in the case of your dependents) than
was imposed pursuant to the plan(s) under which you (in your case)
and/or your dependents (in the case of your dependents) were covered
immediately prior to the Change in Control (or Date of Termination, as
applicable). This coverage will continue for the period hereinafter
provided.
(c) The benefits provided under this Section 2.6 shall continue for a
period of [2][3] years following the date of your Qualifying
Termination; provided, however, that the benefits for medical coverage
under the provisions of Section 2.6(b) shall end as of the date you
become covered under any group health plan maintained by a subsequent
employer which provides benefits to you (and anyone
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entitled to claim the benefits described in Section 2.6(b) under or
through you) not materially less favorable than the benefits described
in Section 2.6(b), and which does not exclude any pre-existing
condition that you or your dependents may have at that time.
2.7 Outplacement Services
If you are entitled to receive a Severance Payment under Section 2.1, the
Company shall also provide you with a full range of outplacement services
provided for up to fifty-two (52) weeks by a reputable organization chosen by
the Company. These outplacement services will be paid for by the Company.
2.8 Withholding of Taxes
The Company or your Employer may withhold from any amounts payable under this
Agreement all federal, state, city or other taxes required by applicable law to
be withheld.
2.9 No Setoff
The Company's obligation to make Severance Payments to you pursuant to this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including, but not limited to, any setoff,
counterclaim, recoupment, defense or other right which the Company or any of its
Subsidiaries or Affiliates may have against you or others.
2.10 Benefits Under Other Plans
The benefits that you may be entitled to receive pursuant to Sections 2.6 and
2.7 of this Agreement are not intended to be duplicative of any similar benefits
to which you may be entitled from the Company or any of its Subsidiaries or
Affiliates under any other severance plan, agreement, policy or program
maintained by the Company or any of its Subsidiaries or Affiliates. Accordingly,
the benefits to which you are entitled under Sections 2.6 and 2.7 shall be
reduced to take account of any other similar benefits to which you are entitled
from the Company or any of its Subsidiaries or Affiliates.
ARTICLE III
OTHER RIGHTS AND BENEFITS NOT AFFECTED
3.1 Other Benefits
This Agreement does not provide a pension for you nor shall any payment
hereunder be characterized as deferred compensation. Except as set forth in
Sections 2.2(b) and 2.10, neither the provisions of this Agreement nor the
Severance Payment provided for hereunder shall reduce any amounts otherwise
payable, or in any way diminish your rights as an employee, whether existing now
or hereafter, under any benefit, incentive,
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retirement, stock option, stock bonus or stock purchase plan or any employment
agreement or other plan or arrangement not related to severance. Any such other
amounts or benefits payable shall be included, as necessary, for making any of
the calculations required under Section 2.3.
3.2 Employment Status
This Agreement does not constitute a contract of employment or impose on you any
obligation to remain in the employ of the Employer, nor does it impose on the
Company or any of its Subsidiaries or Affiliates any obligation to retain you in
your present or any other position, or to change the status of your employment
as an employee at will. Nothing in this Agreement shall in any way require the
Company or any of its Subsidiaries or Affiliates to provide you with any
severance benefits prior to a Change in Control (except that the foregoing shall
not modify the second and third sentences of Section 2.1), nor shall this
Agreement ever be construed in any way as establishing any policies or
requirements of the Company or any of its Subsidiaries or Affiliates for the
termination of your employment or the payment of severance benefits to you if
your employment terminates prior to a Change in Control, nor shall anything in
this Agreement in any way affect the right of the Company or any of its
Subsidiaries or Affiliates in its absolute discretion to change prior to a
Change in Control one or more benefit plans, including but not limited to
pension plans, dental plans, health care plans, savings plans, bonus plans,
vacation pay plans, disability plans, and the like.
ARTICLE IV
SUCCESSOR TO COMPANY
The Company shall require any successor or assignee, whether direct or indirect,
by purchase, merger, consolidation or otherwise, to all or substantially all the
business or assets of the Company, expressly and unconditionally to assume and
agree to perform the Company's obligations under this Agreement, in the same
manner and to the same extent that the Company would be required to perform if
no such succession or assignment had taken place. In such event, the term
"Company," as used in this Agreement, shall mean the Company as herein before
defined and any successor or assignee to the business or assets which by reason
hereof becomes bound by the terms and provisions of this Agreement.
ARTICLE V
LEGAL FEES AND EXPENSES
The Company shall pay as they become due all legal fees, costs of litigation and
other expenses incurred in good faith by you as a result of the Company's
refusal or failure to make the Severance Payment to which you become entitled
under this Agreement, as a result of the Company's contesting the validity,
enforceability or interpretation of this Agreement or of your right to benefits
hereunder, or with regard to any Dispute (as
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defined in Section 2.3(b)). You shall be conclusively presumed to have acted in
good faith unless a court makes a final determination not otherwise subject to
appeal to the contrary.
ARTICLE VI
ARBITRATION
Except as otherwise provided in Section 2.3, you shall have the right and option
(but not the obligation) to elect (in lieu of litigation) to have any dispute or
controversy arising under or in connection with this Agreement not otherwise
resolved through the claims procedure set forth in Section 7.12, including any
dispute under Section 2.3, settled by arbitration, conducted before a panel of
three arbitrators sitting in a location selected by you within fifty (50) miles
from the location of your job with the Employer immediately prior to the Change
in Control (determined without regard to any relocation thereof which
constitutes an Enumerated Event), in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the award of
the arbitrator in any court having jurisdiction. All expenses of such
arbitration, including the fees and expenses of your counsel, shall be borne,
and paid as incurred, by the Company; provided that the Company shall only be
required to pay your fees and expenses if they are incurred in good faith. You
shall be conclusively presumed to have acted in good faith unless and until the
arbitrator makes a final determination to the contrary. Notwithstanding any
provision of this Agreement to the contrary, you shall be entitled to seek
specific performance of your 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.
ARTICLE VII
MISCELLANEOUS
7.1 Applicable Law
To the extent not preempted by the laws of the United States and in the interest
of interpreting this Agreement in a uniform manner with other similar agreements
being entered into by the Company with other of its and its Subsidiaries' and
Affiliates' employees regardless of the jurisdiction in which you are employed
or any other factor, the laws of the State of Illinois shall be the controlling
law in all matters relating to this Agreement, regardless of the choice-of-law
rules of the State of Illinois or any other jurisdiction.
7.2 Construction
No term or provision of this Agreement shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any provision of this Agreement and any present or future statute, law,
ordinance, or
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regulation contrary to which the parties have no legal right to contract, the
latter shall prevail, but in such event the affected provision of this Agreement
affected shall be curtailed and limited only to the extent necessary to bring
such provision within the requirements of the law.
7.3 Severability
If a provision of this Agreement shall be held illegal or invalid, the
illegality or invalidity shall not affect the remaining parts of this Agreement
and this Agreement shall be construed and enforced as if the illegal or invalid
provision had not been included.
7.4 Headings
The Section headings in this Agreement are inserted only as a matter of
convenience, and in no way define, limit, or extend or interpret the scope of
this Agreement or of any particular Section.
7.5 Termination Procedures and Compensation During Dispute
(a) Notice of Termination. After a Change in Control and during the
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Term, any purported termination of your employment (other than by
reason of death) shall be communicated by a written Notice of
Termination from the Employer to you or by you to the Employer in
accordance with Section 7.10 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the
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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 your employment under the provision
so indicated. Further, a Notice of Termination for Just 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 of directors of the Employer at a meeting of
such board of directors which was called and held for the purpose of
considering such termination (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before
such board of directors) finding that, in the good faith opinion of
such board of directors, you were guilty of conduct set forth in
clause (a) or (b) of the definition of Just Cause herein, and
specifying the particulars thereof in detail.
(b) Date of Termination. "Date of Termination," with respect to any
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purported termination of your employment after a Change in Control and
during the Term, shall mean (i) if your employment is terminated for
Disability, thirty (30) days after Notice of Termination is given
(provided that you shall not have returned to the full-time performance
of your duties during such thirty (30) day period), and (ii) if your
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
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termination for Just Cause) and, in the case of a termination by you,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
(c) Dispute Concerning Termination. If within fifteen (15) days
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after any Notice of Termination is given, or, if later, prior to the
Date of Termination (as determined without regard to this Section
7.5(c)), 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 you only if such notice is
given in good faith and you pursue the resolution of such dispute with
reasonable diligence.
(d) Compensation During Dispute. If a purported termination occurs
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following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.5(c) hereof, the
Company shall continue to pay you the full compensation in effect when
the notice giving rise to the dispute was given (including, but not
limited to, salary) and continue you as a participant in all
compensation, benefit and insurance plans in which you were
participating when the notice giving rise to the dispute was given,
until the Date of Termination, as determined in accordance with Section
7.5(c) hereof. Amounts paid under this Section 7.5(d) are in addition
to all other amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement.
7.6 Assignability
Neither this Agreement nor any right or interest therein shall be assignable or
transferable (whether by pledge, grant of a security interest, or otherwise) by
you, your beneficiaries or legal representatives, except by will or by the laws
of descent and distribution. This Agreement shall be binding upon and shall
inure to the benefit of the Company, its successors and assigns, and you and
shall be enforceable by them and your legal personal representatives.
7.7 Entire Agreement
This Agreement constitutes the entire agreement between the Company and you
regarding the subject matter hereof and supersedes all prior agreements, if any,
understandings and arrangements, written or oral, between the Company and you
with respect to the subject matter hereof.
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7.8 Term
The term of this Agreement (the "Term") shall commence on the date hereof and
shall continue in effect through December 31, 2003; provided, however, that
commencing on January 1, 2003 and each January 1 thereafter, the Term shall
automatically be extended for one additional year unless, not later than
September 30 of the preceding year, the Company or you 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. If you become entitled to Severance Payments hereunder, this Agreement
shall continue and be effective until you (or the person(s) specified in Section
2.5) shall have received in full all Severance Payments and other benefits to
which you are entitled under this Agreement, at which time this Agreement shall
terminate for all purposes.
7.9 Amendment
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 you and
the Company. No waiver by the Company or you at any time of any breach by the
other party of, or 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 any prior or subsequent time.
No agreement or representations, written or oral, express or implied, with
respect to the subject matter hereof, have been made by either party which are
not expressly set forth in this Agreement.
7.10 Notices
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 sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company or the Employer shall be
directed to the attention of the Board of Directors with a copy to the General
Counsel of the Company. All notices and communications shall be deemed to have
been received on the date of delivery thereof or on the third business day after
the mailing thereof, except that notice of change of address shall be effective
only upon actual receipt. No objection to the method of delivery may be made if
the written notice or other communication is actually received.
7.11 Administration
The Company has entered into agreements similar to this Agreement herein with
other employees of the Company and its Subsidiaries and Affiliates. These
agreements, taken together, constitute a welfare benefit plan within the meaning
of Section 3(1) of ERISA. The Administrator of such plan, within the meaning of
Section 3(16) of ERISA, and the Named Fiduciary thereof, within the meaning of
Section 402 of ERISA, is the Company.
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7.12 Claims
If you believe you are entitled to a benefit under this Agreement, you may make
a claim for such benefit by filing with the Company a written statement setting
forth the amount and type of payment so claimed. The statement shall also set
forth the facts supporting the claim. The claim may be filed by mailing or
delivering it to the Secretary of the Company. Within 90 calendar days after
receipt of such a claim, the Company shall notify you in writing of its action
on such claim and if such claim is not allowed in full, shall state the
following in a manner calculated to be understood by you:
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent provisions of this Agreement on
which the denial is based;
(c) A description of any additional material or information
necessary for you to be entitled to the benefits that have been denied
and an explanation of why such material or information is necessary;
and
(d) An explanation of this Agreement's claim review procedure.
If you disagree with the action taken by the Company, you or your duly
authorized representative may apply to the Company for a review of such action.
Such application shall be made within 60 calendar days after receipt by you of
the notice of the Company's action on your claim. The application for review
shall be filed in the same manner as the claim for benefits. In connection with
such review, you may inspect any documents or records pertinent to the matter
and may submit issues and comments in writing to the Company. A decision by the
Company shall be communicated to you within 60 calendar days after receipt of
the application (unless special circumstances require an extension of time, but
in no event more than 120 days after such receipt). The decision on review shall
be in writing and shall include specific reasons for the decision, written in a
manner calculated to be understood by you, and specific references to the
pertinent provisions of this Agreement on which the decision is based.
7.13 Individual Severance Agreement
This Agreement constitutes an individual severance agreement for purposes of the
Company's Severance Plan (the "Severance Plan"). Accordingly, you will not be
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eligible to receive any severance payments or other benefits under the Severance
Plan.
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If this Agreement is acceptable to you, please sign the enclosed copy of this
Agreement in the space provided below and return it to me.
Sincerely,
Xxxxxxx X. Xxx
Chairman of the Board, President and CEO
ACCEPTED AND AGREED TO:
By:________________________________
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