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EXHIBIT 10(ii)
MANAGEMENT CONTINUITY AGREEMENT
THIS AGREEMENT, dated as of August 4, 1998, is made by and
between Xxxxxx Industries, Inc., an Ohio corporation (the "Company"), and
_________________________________ (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its shareholders 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 shareholders; 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. The Term of this Agreement shall
commence on the date hereof and shall continue in effect through December 31,
2000; provided, however, that commencing on January 1, 2000 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 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. Notwithstanding any other provision
hereof, (a) the Term shall expire upon any termination of the Executive's
employment prior to a Potential Change in Control and (b) the Term shall expire
(and for purposes of the application of the provisions of the Agreement, shall
be deemed to have expired) on the date (or scheduled date, as the case may be)
of the Executive's Retirement.
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
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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.
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 intends to remain in
the employ of the Company until there occurs a Change in Control.
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 (without giving
effect to any reduction in base salary, which reduction constitutes an event of
Good Reason) or, if higher, the rate in effect immediately prior to the Change
in Control, 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 (without giving effect to any
reduction in compensation or benefits, which reduction constitutes an event of
Good Reason) or, if more favorable to the Executive, as in effect immediately
prior to the Change in Control.
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 (without
giving effect to any adverse change in such plans, programs and arrangements,
which adverse change constitutes an event of Good Reason) or, if more favorable
to the Executive, as in effect immediately prior to the Change in Control.
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6. Severance Payments.
6.1 Subject to Section 6.2 hereof, if (i) 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, Disability or
Retirement, 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 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 after the
occurrence of a Potential Change in Control and 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 or (ii)
the Executive terminates his employment for Good Reason after the occurrence of
a Potential Change in Control and 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.
(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 __________________ [ ] (or, if less, the number of
full and partial years between the Date of Termination and the
Executive's scheduled date of Retirement) times the sum of (i) the
Executive's base salary as in effect immediately prior to the Date of
Termination (without giving effect to any reduction in base salary,
which reduction constitutes an event of Good Reason) or, if higher, in
effect immediately prior to the Change in Control, and (ii) the higher
of (A) the average annual bonus earned by the Executive pursuant to
the 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 (without giving
effect to any reduction in bonus caused by an adverse change in the
Executive's bonus plan participation, which adverse constitutes an
event of Good Reason) or, if higher, immediately prior to the fiscal
year in which occurs the Change in Control or (B) the Executive's
target annual bonus for the fiscal year in which occurs the Date of
Termination (without giving effect to any reduction in bonus caused by
an adverse change in the Executive's bonus plan participation, which
adverse change constitutes an event of Good Reason) or, if higher, the
fiscal year in which occurs the Change in Control.
(B) For the ________________________ [ ]
month period (or, if less, the number of months between the Date of
Termination and the Executive's scheduled date of Retirement)
immediately following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents with life,
disability, accident and
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health insurance benefits substantially similar to those provided to
the Executive and his dependents immediately prior to the Date of
Termination (without giving effect to any reduction in benefits, which
reduction constitutes an event of Good Reason) or, if more favorable
to the Executive, those provided to the Executive and his dependents
immediately prior to the Change in Control, at no greater cost to the
Executive than the cost to the Executive immediately prior to such
date; 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 ___________________ [ ] (or, if less, the number
of months between the Date of Termination and the Executive's
scheduled date of Retirement) 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 date on which the Change
in Control occurs. If the Severance Payments shall be decreased
pursuant to Section 6.2 hereof, and the Section 6.1(B) benefits which
remain payable after the application of Section 6.2 hereof are
thereafter reduced pursuant to the immediately preceding sentence, the
Company shall, no later than five (5) business days following such
reduction, pay to the Executive the least of (a) the amount of the
decrease made in the Severance Payments pursuant to Section 6.2
hereof, (b) the amount of the subsequent reduction in these Section
6.1(B) benefits, or (c) the maximum amount which can be paid to the
Executive without being, or causing any other payment to be,
nondeductible by reason of section 280G of the Code.
(C) Notwithstanding any provision of any
annual incentive plan to the contrary, the Company shall pay to the
Executive a lump sum amount, in cash, equal to the product of (i) the
target bonus to which the Executive would have been entitled under the
Company's annual incentive plan in respect of the year in which the
Date of Termination occurs and (ii) a fraction, the numerator of which
shall be the number of months (including fractions thereof) from the
first day of the fiscal year during which the Date of Termination
occurs to the Date of Termination, and the denominator of which shall
be twelve (12); provided, however, that if the Date of Termination
occurs during the same year as the Change in Control, the payment
under this Section 6.1(C) shall be offset by any payments received
under the Company's annual incentive plan in connection with such
Change in Control.
(D) In addition to the retirement benefits
to which the Executive is entitled under each Pension Plan or any
successor plan thereto, the Company shall pay the Executive a lump sum
amount, in cash, equal to the sum of (i) the pay related credits
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the Executive would have accrued under the Salaried Employees'
Retirement Plan of Xxxxxx Industries, Inc. and the Xxxxxx Industries,
Inc., Supplemental Excess Defined Benefit Plan; and (ii) the
Company-Matching Contributions the Executive would have accrued under
the Xxxxxx Industries, Inc., Savings and Stock Ownership Plan and the
Xxxxxx Industries, Inc., Supplemental Excess Defined Contribution Plan
(the plans referred to in subsections (i) and (ii) hereof, "The
Plans"), in each case, during the _____________________ [ ] month (or,
if less, the number of months between the Date of Termination and the
Executive's scheduled date of Retirement) period immediately following
the Executive's Date of Termination based upon: (1) the terms and
provisions of The Plans as in effect immediately prior to the Change
in Control; (2) the lump sum payment set forth in Section 6.1(A)
hereof, which lump sum shall be deemed to have been earned ratably
over such period; and (3) the assumption that the Executive was making
the maximum allowable pre-tax contributions under The Plans during
such period.
(E) The Company shall provide the Executive
with outplacement services suitable to the Executive's position for a
period of one year or, if earlier, until the first acceptance by the
Executive of an offer of employment.
(F) The Company shall continue to maintain
officers' indemnification insurance for the Executive for a period of
five years following the Date of Termination, the terms and conditions
of which shall be no less favorable than the terms and conditions of
the officers' indemnification insurance maintained by the Company for
the Executive immediately prior to the date on which the Change in
Control occurs.
6.2 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any payment or benefit received or to be received by the
Executive in connection with a Change in Control or the termination of the
Executive's 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 Change in Control or any Person affiliated with the Company or such
Person) (all such payments and benefits, including the Severance Payments,
being hereinafter called "Total Payments") will be subject (in whole or part)
to the Excise Tax, then, subject to the provisions of subsection (B) of this
Section 6.2, 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. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to pay federal income
taxes 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
tax which could be obtained from deduction of such state and local taxes.
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(B) In the event that the amount of the Total Payments
does not exceed 110% of the largest amount that would result in no portion of
the Total Payments being subject to the Excise Tax (the "Safe Harbor"), then
subsection (A) of this Section 6.2 shall not apply and the noncash Severance
Payments shall first be reduced (if necessary, to zero), and the cash Severance
Benefits shall thereafter be reduced (if necessary, to zero) so that the amount
of the Total Payments is equal to the Safe Harbor; provided, however, that the
Executive may elect to have the cash Severance Payments reduced (or eliminated)
prior to any reduction of the noncash Severance Payments.
(C) 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 other 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. Prior to the payment date set forth in Section 6.3 hereof, the Company
shall provide the Executive with its calculation of the amounts referred to in
this Section 6.2(C) and such supporting materials as are reasonably necessary
for the Executive to evaluate the Company's calculations. If the Executive
disputes the Company's calculations (in whole or in part), the reasonable
opinion of Tax Counsel with respect to the matter in dispute shall prevail.
(D) In the event that (i) amounts are paid to the
Executive pursuant to subsection (A) of this Section 6.2, (ii) the Excise Tax
is finally determined to be less than the amount taken into account hereunder
in calculating the Gross-Up Payment, and (iii) after giving effect to such
redetermination, the Severance Payments are to be reduced pursuant to
subsection (B) of this Section 6.2, the Executive shall repay to the Company,
within five (5) business days following the time that the amount of such
reduction in 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 (i) no portion of the
Total Payments being subject to the Excise Tax and (ii) a dollar-for-dollar
reduction in the Executive's taxable income and wages for
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purposes of federal, state and local income and employment taxes) plus interest
on the amount of such repayment at the rate provided in section 1274(b)(2)(B)
of the Code. In the event that (x) the Excise Tax is determined to exceed the
amount taken into account hereunder at the time of the termination of the
Executive's employment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment) and
(y) after giving effect to such redetermination, the Severance Payments should
not have been reduced pursuant to subsection (B) of this Section 6.2, the
Company shall make an additional Gross-Up Payment in respect of such excess and
in respect of any portion of the Excise Tax with respect to which the Company
had not previously made a Gross-Up Payment (plus any interest, penalties or
additions payable by the Executive with respect to such excess and such
portion) within five (5) business days following the time that the amount of
such excess is finally determined.
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, and the limitations on such payments set forth in
Section 6.2 hereof, 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 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 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 the rate provided in section 1274(b)(2)(B) of the Code). 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 request(s) for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
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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 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, u, 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
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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, 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 Section
6 hereof or Section 7.4 hereof. Further, the amount of any payment or benefit
provided for in this Agreement (other than Section 6.1(B) 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.
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
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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:
Xxxxxx Industries, Inc.
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Senior Vice President, Human Resources
11. Miscellaneous. 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 for Good Reason. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Ohio. 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
reduced to the extent necessary so that the Company may satisfy 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. 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.
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.
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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 Board and shall be in
writing. Any denial by the Board of a claim for benefits under this Agreement
shall be delivered to the Executive in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement relied
upon. The Board 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 Board a decision of the Board within sixty (60) days after
notification by the Board 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.
15. 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 13d3 under the Exchange Act.
(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
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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 Board 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 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 (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, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company's shareholders was
approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or
recommended; or
(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 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 (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 Company or
its Affiliates) representing 25% or more of the combined
voting power of the Company's then outstanding securities; or
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(IV) the shareholders of the Company approve
a plan of complete liquidation or dissolution of the Company
or there is consummated an agreement for the sale or
disposition 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 60% of the combined voting power of the
voting securities of which are owned by shareholders of the
Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "Company" shall mean Xxxxxx Industries, Inc. and, except
in determining under Section 15(E) 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.
(J) "Date of Termination" shall have the meaning set forth in
Section 7.2 hereof.
(K) "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.
(L) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(M) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(N) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(O) "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
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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 or reporting relationship 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;
(III) the relocation of the Executive's
principal place of employment to a location which increases
the Executive's one-way commuting distance by more than 50
miles or the Company's requiring the Executive to be based
anywhere other than the Executive's principal place of
employment immediately prior to the Change in Control (or
permitted relocation thereof) except for required travel on
the Company's business to an extent substantially consistent
with the Executive's business travel obligations immediately
prior to the Change in Control;
(IV) the failure by the Company to pay to
the Executive any portion of the Executive's current
compensation, 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 Stock Incentive Plan, the Amended and
Restated Management Annual Incentive Plan and the Management
Incentive Compensation Deferral 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;
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(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, 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 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;
(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; or
(VIII) any failure of the Company to obtain
assumption of this Agreements, as set forth in Section 9.1
hereof.
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 Board by clear and convincing evidence that
Good Reason does not exist.
(P) "Gross-Up Payment" shall have the meaning set forth in
Section 6.2 hereof.
(Q) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(R) "Pension Plan" shall mean any tax-qualified, supplemental
or excess benefit pension plan maintained by the Company and any other plan or
agreement entered into between the Executive and the Company which is designed
to provide the Executive with supplemental retirement benefits.
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(S) "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
shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company or (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).
(T) "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 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.
(U) "Retirement" shall mean the termination of the
Executive's employment in accordance with the Company's mandatory retirement
policy as in effect immediately prior to the Change in Control.
(V) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(W) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(X) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
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(Y) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
XXXXXX INDUSTRIES, INC.
By:
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Name: Xxxx X. Xxxxxxxxxx, Xx.
Title: Senior Vice President,
Human Resources
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EXECUTIVE
Address:
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