Exhibit 10.16
SENIOR OFFICER CHANGE IN CONTROL, SEVERANCE
AND SPECIAL PENSION AGREEMENT
THIS SENIOR OFFICER CHANGE IN CONTROL, SEVERANCE AND SPECIAL
PENSION AGREEMENT (the "Agreement") is made as of this 8th day of
March, 2000 between WISCONSIN ENERGY CORPORATION (the "Company")
and XXXX XXXXXXX (the "Executive").
The Executive is currently a Senior Vice President and Chief
Financial Officer of the Company and the Board of Directors of
the Company (the "Board") wishes to encourage the Executive to
continue to devote his time and attention to pursuit of Company
matters without distractions relating to his employment security.
In consideration of the terms and conditions set forth
below, the parties agree as follows:
1. Defined Terms. All of the capitalized terms used in
this Agreement are defined in the attached Appendix.
2. Purpose of Agreement. This Agreement is intended to
provide the Executive with certain minimum compensation rights in
the event of his termination of employment under certain
circumstances as set forth herein and to provide certain special
pension rights applicable to the Executive.
3. Obligation of the Company on a Covered Termination of
Employment Associated with a Change in Control. In the event of
a Covered Termination of Employment Associated with a Change in
Control, then the Company shall provide the Executive with the
following compensation and benefits:
(a) General Compensation and Benefits. The Company
shall pay the Executive's full salary to the Executive from
the time notice of termination is given through the date of
termination of employment at the rate in effect at the time
such notice is given or, if higher, at an annual rate not
less than twelve times the Executive's highest monthly base
salary for the twelve-month period immediately preceding the
month in which the Effective Date occurs, together with all
compensation and benefits payable to the Executive through
the date of termination of employment under the terms of any
compensation or benefit plan, program or arrangement
maintained by the Company during such period. Such payments
shall be made in a lump sum not later than ten business days
after such termination. The Company shall also pay the
Executive's normal post-termination compensation and
benefits to the Executive as such payments become due,
except that any normal cash severance benefits shall be
superseded and replaced entirely by the benefits provided
under this Agreement. 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 most favorable to the Executive in effect at
any time during the 180-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to
executives of the Company of comparable status and position
to the Executive.
(b) Incentive Compensation. Notwithstanding any
provision of any cash bonus or incentive compensation plan
of the Company, the Company shall pay to the Executive,
within ten business days after the Executive's termination
of employment, a lump sum amount, in cash, equal to the sum
of (i) any bonus or incentive compensation which has been
allocated or awarded to the Executive for a fiscal year or
other measuring period under the plan that ends prior to the
date of termination of employment, but which has not yet
been paid, and (ii) a pro rata portion of the Highest Bonus
Amount for all uncompleted periods under any bonus or
incentive compensation plan.
(c) Special Compensation. The Company shall pay to
the Executive a lump sum equal to three times the sum of (a)
the highest per annum base rate of salary in effect with
respect to the Executive during the three-year period
immediately prior to the termination of employment plus (b)
the Highest Bonus Amount. Such lump sum shall be paid by
the Company to the Executive within ten business days after
the Executive's termination of employment, unless the
Executive shall have filed a written irrevocable deferral
election form with the Company prior to the first date on
which a Change in Control of the Company occurs electing to
defer all or part the special compensation provided by this
Section 3(c) and irrevocably specifying a method of payment
for such compensation from among the methods allowable under
the Company's Executive Deferral Compensation Plan (the
"EDCP"). Any deferred amounts shall be credited with
earnings in the same manner as the Interest Rate Fund
provided for in the EDCP and the EDCP provisions shall apply
to deferrals made hereunder except that (i) the provisions
for a mandatory lump sum payment upon a "Change in Control"
as defined in the EDCP shall not apply to deferrals made
hereunder and (ii) the entire amount deferred under
Section 3(c) of this Agreement shall be paid in a lump sum
by the Company no later than the occurrence of a Change in
Control to such grantor or "rabbi" trust as the Company
shall have established as a vehicle to hold such amount
pending payment, but with such trust designed so that the
Executive's rights to payment of such benefits are no
greater than those of an unsecured creditor. The amount of
the aggregate lump sum provided by this Section 3(c),
whether paid immediately or deferred, shall not be counted
as compensation for purposes of any other benefit plan or
program applicable to the Executive.
(d) Special Retirement Plans Lump Sum. The Company
shall pay to the Executive an aggregate lump sum equal to
the total of the amounts described in (a) and (b) herein.
Amount (a) is a lump sum equal to the difference between (i)
the actuarial equivalent of the benefit under the Company's
tax-qualified pension plan, the Retirement Account Plan (the
"Retirement Plans") and the Supplemental Executive
Retirement Plan (the "SERP") described in Section 7 below
which the Executive would receive if his employment
continued for a three-year period following termination of
employment, assuming that the Executive's compensation
during such three-year period would have been equal to the
Executive's salary as in effect immediately before the
termination or, if higher, as in effect at any time during
the 180-day period immediately preceding the termination
date, and the Highest Bonus Amount, and (ii) the actuarial
equivalent of the Executive's actual benefit (paid or
payable) under the Retirement Plan and the SERP as of the
termination date. Actuarial equivalency for this purpose
shall be determined using an interest rate equal to the
five-year United States Treasury note yield in effect on the
last business day of the month prior to the Effective Date
as such yield is reported in the Wall Street Journal or
comparable publication, and the mortality table used for
purposes of determining lump sum amounts then in use under
the Retirement Plan. Amount (b) is a lump sum equal to the
total of (i) the additional contributions which would have
been made to the Executive's account under the Company's
tax-qualified 401(k) plan, plus (ii) the additional
contributions which would have been credited to the
bookkeeping account balance of the Executive attributable to
the 401(k) match feature of the EDCP, had the Executive
continued in employment for a three-year period following
termination of employment and assuming that the Executive's
compensation would have been the same as set forth above and
that the Executive had made maximum utilization of the
pre-tax and after-tax opportunity in the qualified 401(k)
plan and obtained the maximum matching contributions in such
plan. The amount of the aggregate lump sum under this
Section 3(d) shall be paid by the Company to the Executive
within ten business days after the Executive's termination
of employment. The amount of the lump sum provided by this
Section 3(d) shall not be treated as compensation for
purposes of any other benefit plan or program applicable to
the Executive. An example of the calculation of the
aggregate lump sum amount provided by this Section 3(d) is
attached following the Appendix and is made a part of this
Agreement.
(e) Welfare Benefits. Subject to Section 3(f) below,
for the "relevant three-year period" as defined below, the
Company shall provide the Executive with health, disability,
life and other welfare benefits substantially similar to the
benefits received by the Executive pursuant to welfare
benefit programs of the Company or its affiliates as in
effect immediately during the 180 days preceding the
Effective Date (or, if more favorable to the Executive, as
in effect at any time thereafter until the termination of
employment); provided, however, that no compensation or
benefits provided hereunder shall be treated as compensation
for purposes of any of the programs or shall result in the
crediting of additional service thereunder. For purposes of
determining the amount of such welfare benefits, any part of
which shall be based on compensation, the Executive's
compensation during the relevant three-year period shall be
deemed to be equal to the Executive's salary as in effect
immediately before the termination of employment or, if
higher, as in effect at any time during the 180-day period
immediately preceding the termination date, and the Highest
Bonus Amount. To the extent that any of the welfare
benefits covered by this Section 3(e) cannot be provided
pursuant to the plan or program maintained by the Company or
its affiliates, the Company shall provide such benefits
outside the plan or program at no additional cost
(including, without limitation, tax cost) to the Executive
and his family. The Executive shall be entitled to be
covered by a retiree medical and dental program at the end
of the relevant three-year period, at a cost to the
Executive not to exceed the lesser of the cost, if any,
charged to other retirees or the COBRA continuation premium
charged to terminees who elect to continue in the Company's
health plan at their expense under applicable law. The
Company shall become obligated to continue such benefits for
the remainder of the Executive's life and that of his
surviving spouse, notwithstanding any contrary provision or
power of amendment or termination reserved to the Company in
any otherwise applicable document. The "relevant three-year
period" shall mean a three-year period beginning on the
later of the Executive's termination of employment or the
expiration of the welfare benefits coverage provided to the
Executive under an agreement dated June 1, 1998 between the
Executive and Sundstrand Corporation.
(f) New Employment. If the Executive secures new
employment during the "relevant three-year period" as
defined in Section 3(e) above, the level of any benefit
being provided pursuant to Section 3(e) hereof shall be
reduced to the extent that any such benefit is being
provided by the Executive's new employer. The Executive,
however, shall be under no obligation to seek new employment
and, in any event, no other amounts payable pursuant to this
Agreement shall be reduced or offset by any compensation
received from new employment or by any amounts claimed to be
owed by the Executive to the Company or its affiliates.
(g) Split-Dollar Life Insurance. Notwithstanding the
provisions of Section 3(e) above, the Company shall continue
to make premium payments on any split-dollar type life
insurance program in effect on the life of the Executive
during the 180 days preceding the Effective Date (or, if
more favorable to the Executive, as in effect at any time
thereafter until the termination of employment), in a manner
consistent with the past practices of the Company as to
timing and amount, until each policy has achieved paid-up
status.
(h) Equity Incentive Awards. Notwithstanding the
provisions in any stock option award, restricted stock award
or other equity incentive compensation award (the "Awards"),
the Executive shall become fully vested in all outstanding
Awards and all otherwise applicable restrictions shall lapse
and for purposes of determining the length of time the
Executive has to exercise rights, if applicable under any
such Award, the Executive shall be treated as if he had
retired from the service of the Company at or after age 55
and completion of ten years of service.
4. Obligation of the Company on a Covered Termination of
Employment Not Associated with a Change in Control of the
Company. In the event of a Covered Termination of Employment Not
Associated with a Change in Control of the Company, then the
Company shall provide the Executive with the same compensation
and benefits and subject to the same terms and conditions as are
specified in Section 3 above, but the tax gross-up provisions of
Section 5 hereof shall not apply. Further, the deferral election
for the Executive described in Section 3(c) above shall apply,
but only if the written irrevocable deferral form is filed with
the Company both prior to the expiration of thirty days from the
date this Agreement is signed by the Executive and prior to the
Executive's termination of employment.
5. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, and whether or not a Covered Termination of
Employment occurs, in the event it shall be determined that
any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5) (a
"Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") or any interest or penalties are
incurred by the Executive 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 Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes
(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 on the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of paragraph (c) of this
Section 5, all determinations required to be made under this
Section 5, 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 a certified public
accounting firm designated by the Executive (the "Accounting
Firm"), which shall provide detailed supporting calculations
both to the Company and the Executive within fifteen
business days of the receipt of notice from the Executive
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 in Control, the
Executive 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, as determined pursuant to this Section
5, shall be paid by the Company to the Executive 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 Executive. As a result of the
uncertainty in the application of Section 4999 of the Code
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
to be made hereunder. In the event that the Company
exhausts its remedies pursuant to paragraph (c) of this
Section 5 and the Executive 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 Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service 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 ten business days after the
Executive 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 Executive
shall not pay such claim prior to the expiration of the
thirty-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 Executive in writing
prior to the expiration of such period that it desires to
contest such claim, the Executive 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 Executive harmless,
on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing
provisions of this paragraph (c) of Section 5, the Company
shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego 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
Executive to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and the
Executive 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 Executive to pay such claim and xxx
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and
shall indemnify and hold the Executive 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 provided,
further, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the
Executive 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 Executive shall
be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to paragraph (c) of
this Section 5, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of
paragraph (c) of this Section 5) 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 Executive of an amount advanced by
the Company pursuant to paragraph (c) of this Section 5, a
determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the
expiration of thirty days after such determination, then
such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required
to be paid.
6. Termination of Employment. The Company shall be
entitled to terminate the Executive's employment on account of
Disability pursuant to the procedures set forth in Section (e) of
the Appendix, for Cause pursuant to the procedures set forth in
Section (a) of the Appendix, or without Cause by giving written
notice to the Executive of such termination. The Executive may
terminate his employment for Good Reason by giving the Company
written notice of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good
Reason. A termination of employment by the Executive for Good
Reason shall be effective on the fifth business day following the
date such notice is given, unless the notice sets forth a later
date (which date shall in no event be later than thirty days
after the notice is given). In the event of a dispute regarding
whether the Executive's voluntary termination qualifies as a
termination for Good Reason, no claim by the Company that the
same does not constitute a termination for Good Reason shall be
given effect unless the Company establishes by clear and
convincing evidence that such termination does not constitute a
termination for Good Reason. The Executive may also terminate
his employment without Good Reason by giving the Company written
notice of such termination.
7. Special Pension Provisions. The Executive shall be
eligible to participate in the Company's Supplemental Executive
Retirement Plan (the "SERP") with respect to monthly benefits "A"
and "B," but on the following modified terms which shall override
any contrary provisions in the SERP:
(a) The Executive or his beneficiary will become
entitled to monthly benefit "A" on his retirement at or
after age 55, or in the event of his termination of service
because of death or Disability while in the service of the
Company prior to age 55.
(b) Further, the Executive will be entitled to past
service credit under monthly benefit "A," calculated as if
his participation in the Company's tax-qualified pension
plan, the Retirement Account Plan, had commenced at age 30
and as if the benefit formula under such pension plan for
all periods before December 31, 1995 was the same as in
effect on December 31, 1995, and for all periods after
December 31, 1995, pursuant to the actual benefit formula
used in such pension plan (including the grandfathered
minimum benefit provisions thereof), offset by the value of
any benefits payable to the Executive from Social Security
which is the actuarial equivalent of a single life annuity
benefit payable to the Executive at the later of age 65 or
the date when benefits commence under monthly benefit "A."
Actuarial equivalency for this purpose shall be determined
using an interest rate equal to the five-year United States
Treasury Note yield in effect on the last business day of
the month prior to the month in which benefits commence
under monthly benefit "A," as such yield is reported in the
Wall Street Journal or comparable publication, and the
mortality table used for purposes of determining lump sum
amounts then in use under the qualified defined benefit plan
of the Company or its subsidiaries applicable to the
Executive.
(c) Any early retirement reduction factor that would
otherwise apply to the Executive at any time between ages 55
and 62 will be disregarded and in lieu thereof, the
Executive will be deemed entitled for purposes of monthly
benefit "A" to the following percentages of the calculated
benefit:
Age % of Benefit "A" Becoming
Payable
55 51%
56 57%
57 75%
58 81%
59 86%
60 or later 100%
(d) The Executive will become entitled to monthly
benefit "B" on his retirement at or after 55.
8. Obligations of the Company on Termination of Employment
for Death, Disability, for Cause or by the Executive Other than
for Good Reason. If the Executive's employment is terminated by
reason of his death or Disability (but not under the
circumstances covered by paragraph (c)(iv) of the Appendix), or
if such employment is terminated by the Company for Cause or by
the Executive other than for Good Reason, the Company will pay to
the Executive's estate or legal representative or to the
Executive, as the case may be, all accrued but unpaid base salary
and all other benefits and amounts which may become due in
accordance with the terms of any applicable benefit plan,
contract, agreement or practice (including pursuant to the SERP
as modified pursuant to Section 7 above), but no other
compensation or benefits will be paid under this Agreement.
9. Successors and Binding Agreements.
(a) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) and the direct and indirect
parent of any such successor, to all or substantially all of
the business and/or assets of the Company expressly to
assume and to agree to perform this Agreement in the same
manner and to the same extent the Company would be required
to perform if no succession had taken place. This Agreement
shall be binding upon and inure to the benefit of the
Company and any such successor, and such successor shall
thereafter be deemed the "Company" for the purposes of this
Agreement.
(b) This Agreement shall inure to the benefit of and
be enforceable by the Executive's respective personal or
legal representative, executor, administrator, successor,
heirs, distributees and/or legatees.
(c) Neither the Company nor the Executive may assign,
transfer or delegate this Agreement or any rights or
obligations hereunder except as expressly provided in this
Section. Without limiting the generality of the foregoing,
the Executive's right to receive payments hereunder shall
not be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, other than by
a transfer by will or the laws of descent and distribution.
In the event the Executive attempts any assignment or
transfer contrary to this Section, the Company shall have no
liability to pay any amount so attempted to be assigned or
transferred.
10. Notices. All communications provided for herein shall
be in writing and shall be deemed to have been duly given when
delivered or five business days after having been mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the Company (to the
attention of the Secretary of the Company) at its principal
executive office and to the Executive at his/her principal
residence, or to such other address as any party may have
furnished to the other in writing in accordance herewith, except
that notices of a change of address shall be effective only upon
receipt.
11. Governing Law. The validity, interpretation,
construction and performance of this Agreement shall be governed
by the laws of the State of Wisconsin without giving effect to
the principles of conflict of laws of such state, except that
Section 12 shall be construed in accordance with the Federal
Arbitration Act if arbitration is chosen by the Executive as the
method of dispute resolution.
12. Settlement of Disputes; Arbitration; Attorneys' Fees.
Any dispute or controversy arising under or in connection with
this Agreement shall be settled, at the Executive's election,
either by arbitration in Milwaukee, Wisconsin in accordance with
the rules of the American Arbitration Association then in effect
or by litigation; provided, however, that in the event of a
dispute regarding whether the Executive's employment has been
terminated for Cause or whether the Executive's voluntary
termination qualifies as a termination for Good Reason, the
evidentiary standards set forth in this Agreement shall apply.
Judgment may be entered on the arbitrator's award in any court
having jurisdiction. The Company agrees to pay, as incurred, to
the fullest extent permitted by law, all legal fees and expenses
that the Executive may reasonably incur as a result of any
contest (regardless of outcome) by the Company, the Executive or
others of the validity or enforceability of or liability under,
or otherwise involving any provision of this Agreement.
13. 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. If any provision of this
Agreement shall be held invalid or unenforceable in part, the
remaining portion of such provision, together with all other
provisions of this Agreement, shall remain valid and enforceable
and continue in full force and effect to the fullest extent
consistent with law.
14. Entire Agreement; Amendments. This Agreement
constitutes the entire understanding and agreement of the parties
with respect to the matters discussed herein and supersedes all
other prior agreements and understandings, written or oral,
between the parties with respect thereto. There are no
representations, warranties or agreements of any kind relating
thereto that are not set forth in this Agreement. This Agreement
may not be amended or modified except by a written instrument
signed by the parties hereto or their respective successors and
legal representatives.
15. Withholding. The Company may withhold from any amounts
payable under this Agreement all federal, state and other taxes
as shall be legally required.
16. Certain Limitations. Nothing in this Agreement shall
grant the Executive any right to remain an executive, director or
employee of the Company or of any of its subsidiaries for any
period of time.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and date first written above.
WISCONSIN ENERGY CORPORATION
/s/ Xxxx Xxxxxxx By:/s/ Xxxx Xxxxx
________________ ____________________
XXXX XXXXXXX Xxxx Xxxxx
APPENDIX
This is an appendix to the Senior Officer Change in Control,
Severance and Special Pension Agreement between WISCONSIN ENERGY
CORPORATION and XXXX XXXXXXX dated March 8, 2000 (the
"Agreement").
As used in the Agreement, the terms set forth below shall
have the following meanings:
(a) "Cause" means that the Executive shall, prior to any
termination of employment have:
(i) engaged in any act of fraud, embezzlement or
theft in connection with his duties for or in the course of
his employment by the Company or any of its affiliates; or
(ii) wrongfully disclosed any material confidential
information of the Company or any of its affiliates; or
(iii) engaged in willful misconduct in the performance
of his duties for the Company or any of its affiliates that
was intended to personally benefit the Executive;
and in any such case the act shall have been determined by the
Board (the "Board") to have been materially harmful to the
Company. The Executive may only be terminated for Cause if the
Company gives written notice to the Executive of its intention to
terminate the Executive's employment for Cause, setting forth in
reasonable detail the specific conduct of the Executive that it
considers to constitute Cause and the specific provision(s) of
this Agreement on which it relies, and stating the date, time and
place of the Special Meeting for Cause. The "Special Meeting for
Cause" means a meeting of the Board called and held specifically
for the purpose of considering the Executive's termination for
Cause, that takes place not less than ten and not more than
twenty business days after the Executive receives the notice of
termination for Cause. The Executive shall be given an
opportunity, together with counsel, to be heard at the Special
Meeting for Cause. The Executive's termination for Cause shall
be effective when and if a resolution is duly adopted at the
Special Meeting for Cause, stating that in the good faith opinion
of the Board, the Executive is guilty of the conduct described in
the notice of termination for Cause and that conduct constitutes
Cause under this Agreement. In the event of a dispute regarding
whether the Executive's employment has been terminated for Cause,
no claim by the Company that Cause exists shall be given effect
unless the Company establishes by clear and convincing evidence
that Cause exists.
(b) "Change in Control" with respect to the Company means
the occurrence of any of the following events, as a result of one
transaction or a series of transactions:
(i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, but
excluding the Company, its affiliates and any qualified or
nonqualified plan maintained by the Company or its
affiliates) becomes the "beneficial owner" (as defined in
Rule 13(d) promulgated under such Act), directly or
indirectly, of securities of the Company representing more
than 20% of the combined voting power of the Company's then
outstanding securities;
(ii) individuals who constitute a majority of the
Board immediately prior to a contested election for
positions on the Board cease to constitute a majority as a
result of such contested election;
(iii) the Company is combined (by merger, share
exchange, consolidation, or otherwise) with another
corporation and as a result of such combination: (A) less
than 60% of the combined voting power of the outstanding
securities of the surviving or resulting corporation are
owned in the aggregate by the former shareholders of the
Company (provided that for purposes of this clause (A),
voting securities of the Company issued in connection with
the combination, including securities to cover stock options
or to cure "tainted" shares in a pooling, shall be treated
as having been issued in connection with the combination and
not as having been outstanding immediately prior to such
combination) and (B) those individuals who were directors of
the Company immediately prior to such transaction or
individuals who were nominated for election to the Board by
at least a majority of such directors do not constitute a
majority of the Board of Directors of the surviving or
resulting corporation immediately after such transaction;
(iv) the Company sells, leases, or otherwise transfers
all or substantially all of its properties or assets not in
the ordinary course of business to another person or entity;
or
(v) the Board of Directors determines in its sole and
absolute discretion that there has been a Change in Control
of the Company.
These Change in Control provisions shall apply to successive
Changes in Control on an individual transaction basis.
(c) "Covered Termination of Employment Associated with a
Change in Control" means:
(i) a termination of employment by the Company other
than because of death or Disability and without Cause, which
occurs within a period of eighteen months following the
Effective Date or,
(ii) a termination of employment by the Company other
than because of death or Disability and without Cause within
a period of six months prior to the Effective Date, and it
is reasonably demonstrated by the Executive that such
termination of employment was at the request of a third
party who has taken steps reasonably calculated to effect a
Change in Control or otherwise arose in connection with or
in anticipation of a Change in Control, or
(iii) a termination of employment by the Executive for
Good Reason within a period of eighteen months following the
Effective Date and also subsequent to the occurrence,
without the Executive's written consent, of any event
described in Section (g) after the Effective Date, or, in
the case of an event described in Section (g)(i), (ii),
(iii) or (iv), such event occurs on or before the Effective
Date and it is reasonably demonstrated by the Executive that
such event occurred at the request of a third party who has
taken steps reasonably calculated to effect a Change in
Control or otherwise arose in connection or in anticipation
of a Change in Control, or
(iv) a voluntary termination of employment by the
Executive without Good Reason following completion of one
year of service after a Change in Control of the Company,
provided that the voluntary termination must be effected by
the Executive within six months after the completion of that
one-year of service. Further, if the Executive gives
written notice to the Company any time after a Change in
Control of the Company but before completion of one year of
service thereafter that the Executive intends to so
voluntarily terminate and if the Executive should thereafter
die while in the employ of the Company or incur a
termination of employment because of Disability, in either
case before completion of such one year of service, such
death or termination of employment shall be treated as a
Covered Termination Associated with a Change in Control.
(d) "Covered Termination of Employment Not Associated with
a Change in Control of the Company" means:
(i) a termination of employment by the Company other
than because of death or Disability and without Cause, or
(ii) a termination of employment by the Executive for
Good Reason subsequent to the occurrence, without the
Executive's written consent, of any event described in
Section (g).
(e) "Disability" means that the Executive has been unable,
for a period of 180 consecutive business days, to perform the
material duties of his job, as a result of physical or mental
illness or injury and that a physician selected by the Company or
its insurers and acceptable to the Executive or his legal
representative, has determined that the Executive's incapacity is
total and permanent. A termination of the Executive's employment
by the Company for Disability shall be communicated to the
Executive by written notice and shall be effective on the
thirtieth day after receipt of such notice by the Executive,
unless the Executive returns to full-time performance of his
duties before the expiration of such thirty-day period.
(f) "Effective Date" means the first date on which a Change
in Control of the Company occurs, except that if Section 4 of the
Agreement applies, the term shall mean the date immediately prior
to the Executive's termination of employment.
(g) "Good Reason" means:
(i) the assignment to the Executive of any duties
inconsistent, in the reasonable judgment of the Executive,
with the customary duties of a Chief Financial Officer or
any other action by the Company that results in material
reduction of the Executive's duties and responsibilities, or
(ii) any reduction in the Executive's base salary or
percentage of base salary available as an incentive
compensation or bonus opportunity relative to those most
favorable to the Executive in effect at any time during the
180-day period prior to the Effective Date or to the extent
more favorable to the Executive, those in effect after the
Effective Date, or any failure by the Company to continue to
provide for the Executive's participation in the Company's
long-term incentive plans and programs on a basis
commensurate with other senior executives of the Company, or
(iii) the relocation of the Executive's principal place
of employment to a location more than 35 miles from the
Executive's principal place of employment immediately prior
to the Effective Date, or
(iv) the Company's requiring the Executive to travel
on Company business to a materially greater extent than was
required immediately prior to the Effective Date, or
(v) the failure by the Company to comply with Section
9(a) of this Agreement.
(h) "Highest Bonus Amount" means the highest dollar bonus
which would result from three calculations, as follows: (i) the
highest percentage of base salary ever used with respect to the
calculation of the Executive's bonus during the three complete
fiscal years of the Company immediately preceding the termination
of employment or, if more favorable to the Executive, during the
three complete fiscal years of the Company immediately preceding
the Change in Control of the Company, multiplied times the
highest per annum base rate of salary in effect with respect to
the Executive during the three-year period immediately prior to
the termination of employment; (ii) the highest dollar bonus
earned by the Executive under any cash bonus or incentive
compensation plan of the Company during either of the three
complete fiscal year periods of the Company listed in (i) above,
whichever is more favorable to the Executive; or (iii) the
Executive's bonus or incentive compensation "target" for the
fiscal year in which the termination of employment occurs.
EXAMPLE OF SPECIAL RETIREMENT PLANS LUMP SUM
PROVIDED BY SECTION 3(d)
In the event of a Covered Termination of Employment, the
participant is entitled to a Special Retirement Plans Lump Sum,
as defined in paragraph 3(d) of this Agreement. This is an
Example of how this lump sum will be calculated, using a
hypothetical illustration.
Schedule 1 is a copy of the retirement benefit illustration
provided to Xx. Xxxxxxx under the terms of his employment
agreement. His actual retirement benefit will vary from this
illustration and is dependent upon:
* his actual annual cash compensation (columns 2-5),
* the IRS's actual covered compensation table for the years
noted (column 6), and
* the 5-year U.S. Treasury rate and the annuity mortality
table used for calculating lump sum amounts then in use in the
Company's Retirement Plan (both of which will impact columns 13
and 14).
Xx. Xxxxxxx'x actual retirement benefit will also be reduced to
reflect the value of his future Social Security Benefit-this
reduction is not illustrated.
Schedule 2 calculates Xx. Xxxxxxx'x retirement benefits under a
set of hypothetical assumptions as follows:
1. Participant has a Covered Termination of Employment at the
end of 2002.
2. Participant's annual cash compensation for the years prior
to the Covered Termination is as follows:
Credited Base Annual Total Cash
Year Age Service Salary Bonus Compensation
1999 52 22 $164,583 $87,465 $ 252,048
2000 53 23 395,000 237,000 632,000
2001 54 24 410,000 265,000 675,000
2002 55 25 425,000 250,000 675,000
The benefit calculated in accordance with paragraph 3(d) amount
(a) is the difference between Xx. Xxxxxxx'x retirement benefit as
if he continued employment for three years after the time of a
Covered Termination, minus the value at the time of the Covered
Termination. This value will vary depending upon the 5-Year
U. S. Treasury Note Yield in effect at the time of the Covered
Termination, which is used as the discount rate. For
illustrative purposes, the calculations at two different discount
rates are shown:
EXAMPLE OF SPECIAL RETIREMENT PLANS LUMP SUM
PROVIDED BY SECTION 3(d)
Page Two
At 5.1%:
$4,509,022 - $2,945,312 = $1,563,710
At 7.5%:
$3,632,850 - $2,341,915 = $1,290,935
The benefit under 3(d) amount (b) is equal to three percent of
the total cash compensation (based on the current employer
matching contribution of 50% of the first 6% of pay) during the
three years following the Covered Termination. In this
hypothetical illustration, the benefit is calculated as follows:
Annual cash compensation for three years following Covered
Termination event:
$ 699,695
$ 699,695
$ 699,695
$2,099,085 x 3 percent = $62,973
