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EXHIBIT 10.07
EMPLOYMENT PROTECTION AGREEMENT
THIS AGREEMENT, between Xxxxxx Xxxxxxxx Materials, Inc., a North Carolina
corporation (the "Company"), and _____________ (the "Employee"), dated as of
this ____ day of October, 1996 (the "Effective Date")
W I T N E S S E T H :
WHEREAS, Employee is a valuable member of management of the Company and
the Company desires to ensure the continuity of its senior management; and
WHEREAS, it is the determination of the Company that management continuity
is most likely to occur if senior management is financially protected against
involuntary termination following a "Change of Control" (as defined below) of
the Company; and
WHEREAS, the Company and the Employee have agreed to enter into this
Agreement to provide the Employee with payments and benefits upon certain
terminations of the Employee's employment with the Company in connection with a
Change of Control, in consideration of the Employee's continued service to the
Company (which the parties hereto agree constitutes adequate consideration to
support to the Company's obligations under this Agreement);
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Company and the
Employee as follows:
1. Definitions. For purposes of this Agreement,
(a) "Annual Bonus" shall mean the Employee's highest annual bonus paid
during the period beginning five years prior to a Change of Control and ending
on the date of termination of employment.
(b) "Base Salary" shall mean the highest annual rate of base salary that
Employee receives from the Company or its
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affiliates within the twelve-month period ending on the date of a Change of
Control.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Cause" shall mean (i) the engaging by the Employee in willful
misconduct that is materially injurious to the Company, (ii) the continued use
of drugs (including alcohol) by the Employee in violation of the Company's then
current Substance Abuse Policy, (iii) the commission by the Employee of an act
of fraud or embezzlement against the Company or (iv)
the Employee's having been convicted of, or pleaded guilty or no contest to, a
felony. For this purpose, no act, or failure to act, on the Employee's part
shall be considered "willful" unless done, or omitted to be done, by him not in
good faith and without reasonable belief that his action or omission was in the
best interest of the Company. The Employee shall not be deemed to have been
terminated for Cause, unless the Company shall have given the Employee (A)
notice setting forth, in reasonable detail, the facts and circumstances claimed
to provide a basis for termination for Cause, (B) a reasonable opportunity for
the Employee, together with his counsel, to be heard before the Board and (C) a
notice of termination stating that, in the reasonable judgment of the Board,
the Employee was guilty of conduct set forth in clauses (i), (ii), (iii) or
(iv) above, and specifying the particulars thereof in reasonable detail.
(e) "Change of Control" shall mean:
(i) The acquisition on or after October 18, 1996 by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more of either (A) the fully diluted shares of common
stock of the Company, as reflected on the Company's financial statements (the
"Outstanding Company Common Stock"), or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control: (X) any acquisition by
the Company or any "affiliate" of the Company, within the meaning of 17 C.F.R.
Section
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230.405 (an "Affiliate"), (Y) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any Affiliate
of the Company or (Z) any acquisition by any entity pursuant to a transaction
which complies with clauses (A), (B) and (C) of subsection (iii) of this
definition; or
(ii) Individuals who constitute the Board as of October 18, 1996
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to October 18, 1996 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, and (B) no Person (excluding any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Affiliate of the
Company, or such corporation resulting from such Business Combination or any
Affiliate of such corporation) beneficially owns, directly or
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indirectly, 50% or more of, respectively, the fully diluted shares of common
stock of the corporation resulting from such Business Combination, as reflected
on such corporation's financial statements, or the combined voting power of the
then outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination and (C) at least
a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(f) "COBRA" shall mean 29 U.S.C. Sections 1161-1168, as amended
from time to time.
(g) "Disability" shall mean a medically determined physical or mental
impairment which qualifies the Employee for benefits under the Company's
long-term disability program. An Employee shall not be deemed to have incurred
a Disability until such benefits actually become payable (i.e., after any
applicable waiting period). If the Company does not maintain a long-term
disability program, or if the Employee does not elect coverage under such
program, Disability shall mean the incapacity of the Employee such that he is
unable to perform his duties to the Company for a period of 150 out of 180
consecutive days, as determined in the reasonable judgment of the Committee.
(h) "Good Reason" shall mean (i) a good faith determination by the
Employee that the Company or any of its officers has (A) taken any action which
materially and adversely changes the Employee's position (including titles),
authority or responsibilities with the Company or reduces the Employee's
ability to carry out his duties and responsibilities with the Company or (B)
has failed to take any action where such failure results in material and
adverse changes in the Employee's position (including titles), authority or
responsibilities with the Company or reduces the Employee's ability to carry
out his duties and responsibilities with the Company; (ii) a reduction in the
Employee's Base Salary or a restriction on the eligibility requirements for
other forms of monetary compensation that is inconsistent with the eligibility
requirements used prior to a
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Change of Control; or (iii) requiring the Employee to be employed at any
location more than 35 miles further from his principal residence than the
location at which the Employee was employed immediately preceding the Change of
Control, in any case of (i), (ii) or (iii) without the Employee's prior written
consent.
(i) "IRS" shall mean the United States Internal Revenue Service.
(j) "Term" shall mean the term of this Agreement as set forth in Section
(k) "Welfare Benefits" shall mean all benefits provided by the Company to
its employees pursuant to an "employee welfare benefit plan" as defined in
Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended.
2. Effective Date; Term. This Agreement shall be effective as of the
Effective Date, and shall remain in effect for three (3) years following the
Effective Date, after which time this Agreement shall expire; provided,
however, that on the third anniversary of the Effective Date, and on each
subsequent anniversary thereof (each an "Anniversary Date"), the Term of
this Agreement shall automatically be extended for one additional year, unless
at least sixty (60) days prior to such Anniversary Date, either party to this
Agreement gives written notice to the other party of an intent to cancel such
automatic extension, in which case this Agreement shall expire upon the
expiration of the then existing Term; further provided, however, that,
notwithstanding the above, (a) if a Change of Control occurs prior to the
termination of this Agreement, or (b) if prior to the termination of this
Agreement the Board becomes aware of any circumstances which in the ordinary
course result in a Change of Control (whether or not with respect to the party
first coming to the Board's attention), then under no circumstances will this
Agreement terminate prior to the date that is 31 days following the second
anniversary of the Change of Control. Notwithstanding this Section 2, the
Company's obligations under this Agreement shall survive the termination of
this Agreement if all events giving rise to such obligations occurred prior to
such termination.
3. Obligations of the Company upon Termination. If, during the two year
period following the effective date of a Change of Control, the Company
terminates the Employee's
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employment other than for Cause or Disability, or the Employee terminates his
employment for Good Reason or if, during the thirty day period following the
two year anniversary of the effective date of a Change of Control, the Employee
terminates his employment for any reason:
(a) the Company shall pay to the Employee in a lump sum within 15 days
following Employee's termination of employment:
(i) if not theretofore paid, an amount equal to any portion
of the Employee's earned but unpaid Base Salary (including
unused but accrued vacation time) through the date of
termination of employment; and
(ii) a cash amount equal to twice the sum of:
(A) the Employee's annual Base Salary and
(B) the Employee's Annual Bonus.
(b) the Company shall provide, for the period of two years following the
date of Employee's termination of employment, all Welfare Benefits for the
Employee and his dependents and beneficiaries that are at least as favorable in
all material respects as the benefits provided to such person immediately
preceding the Change of Control and to employees employed by the Company or its
successor in positions following the Change of Control that are similar to the
position the Employee held immediately prior to the Change of Control
("Similarly Situated Active Employees"); provided, however, that, with respect
to this Section 3(b), the Employee shall be required to pay the same share of
the cost of such Welfare Benefits as Similarly Situated Active Employees.
4. Certain Additional Payments by the Company
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Employee, or any benefit provided by the Company to
the Employee (whether paid or payable or distributed or distributable provided
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required
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under this Section 4) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code (or any successor provision) or any interest or
penalties are incurred by the Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Employee shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Employee of all taxes with respect to the
Gross-Up Payment (including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 4(c), all determinations required
to be made under this Section 4, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by Ernst & Young or
such other nationally recognized accounting firm then auditing the accounts of
the Company (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within 15 business days of
the receipt of notice from the Employee that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, or is unwilling or unable to perform its
obligations pursuant to this Section 4, the Employee shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, determined pursuant to this
Section 4, shall be paid by the Company to the Employee within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Employee. As a
result of the potential uncertainty in the application of Section 4999 of the
Code (or any successor provision) at the time of the initial determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required
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to be made hereunder. In the event that the Company exhausts its remedies
pursuant to Section 4(c) and the Employee thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of any claim by the
IRS that, if successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon as practicable but
no later than 20 business days after the Employee is informed in writing of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Employee shall not pay
such claim prior to the expiration of the 30-day period following the date on
which he gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Employee in writing prior to the expiration of such period
that it desires to contest such claim, the Employee shall:
(i) give the Company any information
reasonably requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) permit the Company to participate in
any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
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penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 4(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Employee to pay
such claim and xxx for a refund, the Company shall advance the amount of such
payment to the Employee, on an interest-free basis, and shall indemnify and
hold the Employee harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee shall be entitled to settle or
contest, as the case may be, any other issue raised by the IRS or any other
taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by the
Company pursuant to Section 4(c), the Employee becomes entitled to receive any
refund with respect to such claim, the Employee shall (subject to the Company's
complying with the requirements of Section 4(c)) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Employee of an
amount advanced by the Company pursuant to Section 4(c), a determination is
made that the Employee shall not be entitled to any refund with respect to such
claim and the Company does not notify the Employee in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid
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and the amount of such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
5. Other Compensation and Benefits. The amount payable under this
Agreement in accordance with Section 3(a) shall not be reduced on account of
any compensation received by the Employee from other employment. From and
after the date the Employee is employed by a third party which provides any of
the benefits described in Section 3(b), the Company shall not be obligated to
provide the benefits to the extent provided by such third party.
6. Legal Fees and Expenses. The Company shall promptly reimburse the
Employee for the reasonable legal fees and expenses incurred by the Employee in
connection with enforcing any right of the Employee pursuant to and afforded by
this Agreement; provided, however, that the Company only will reimburse the
Employee for such legal fees and expenses if, in connection with enforcing any
right of the Employee pursuant to and afforded by this Agreement, either (a) a
judgment has been rendered in favor of the Employee by a duly authorized court
of law, (b) a duly authorized court of law determines that the Employee's claim
was not frivolous, or (c) the Company and the Employee have entered into a
settlement agreement providing for the payment to the Employee of any or all
amounts due hereunder.
7. Confidential Information. The Employee shall not disclose any secret
or confidential information, knowledge or data relating to the Company or any
of its affiliated companies, and their respective businesses, obtained by the
Employee during his employment by the Company or any of its affiliated
companies and which is not otherwise public knowledge. In no event shall an
asserted violation of the provisions of this Section 7 constitute a basis for
deferring or withholding any amounts or benefits otherwise payable to the
Employee under this Agreement.
8. Release from Other Severance Benefits; COBRA. The Employee hereby
waives and releases the Company from the obligation to pay any severance
benefits to the Employee on account of a termination of employment on or after
a Change of Control, under any termination or severance policy of the Company
other than this Agreement, so long as all payments are made, and benefits
provided, to the Employee pursuant to Sections 3(a) and (b) herein. To the
extent that the obligation of the Company to provide medical benefits pursuant
to Section 3(b) is fulfilled,
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the period in which such medical benefits are provided shall be credited
towards the continued health care coverage required to be offered to the
Employee by COBRA, to the extent allowable under COBRA and the regulations
promulgated thereunder. In the event that no payment or benefits are required
pursuant to Sections 3(a) and (b), the Employee rescinds any such waiver and
release.
9. Successors. (a) This Agreement is personal to the Employee and,
without the prior written consent of the Company, shall not be assignable by
the Employee otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors. The Company shall cause any successor to its
business, in any transaction in which this Agreement would not be assumed by
such successor by operation of law, to assume this Agreement by contract.
10. Miscellaneous. (a) Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of North Carolina,
applied without reference to principles of conflict of laws.
(b) Notices. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Employee:
If to the Company: Xxxxxx Xxxxxxxx Materials, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: [General Counsel]
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
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(c) Tax Withholding. The Company may withhold from any amounts payable
under this Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
IN WITNESS WHEREOF, the Employee has hereunto set his hand and the Company
has caused this Agreement to be executed in its name on its behalf, as of the
day and year first above written.
XXXXXX XXXXXXXX MATERIALS, INC.
By:
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EMPLOYEE
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