EXHIBIT 10.G
MANAGEMENT SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of July 24, 1998, is made by and between
Xxxxxxxxx Company, Inc., a Delaware corporation (the "Company"), and (the
"Executive").
WHEREAS, the Company considers it essential to the best interests of
its stockholders to xxxxxx the continued employment of key management personnel;
and
WHEREAS, the Board recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definitions of capitalized terms used in this
Agreement are provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall commence on the
date hereof and shall
continue in effect through July 31, 2000; provided, however, that commencing on
August 1, 1999 and each August 1 thereafter, the Term shall automatically be
extended for one additional year unless, not later than April 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.
3. Company's Covenants Summarized. In order to induce the Executive to
remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein. Except as provided in Section 9.1
hereof, no Severance Payments shall be payable under this Agreement unless
there shall have been (or, under the terms of the second sentence of Section 6.1
hereof, there shall be deemed to have been) a termination of the Executive's
employment with the Company following a Change in Control and during the Term.
This Agreement shall not be construed as creating an express or implied
contract of employment and, except as otherwise agreed in writing between the
Executive and the Company, the Executive shall not have any right to be retained
in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to
the terms and conditions of this Agreement, in the event of a Potential Change
in Control during the Term, the Executive will remain in the employ of the
Company until the earliest of (i) a date which is six (6) months from the date
of such Potential Change of Control, (ii) the date of a Change in Control, (iii)
the date of termination by the Executive of the Executive's employment for Good
Reason or by reason of death, Disability or Retirement, or (iv) the termination
by the Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
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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 (other than the Com pany's short- or long-term disability plan, as
applicable), until the Executive's employment is terminated by the Company for
Disability.
5.2 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay the
Executive's full salary to the Executive through the Date of Termination at the
rate in effect immediately prior to the Date of Termination or, if higher, the
rate in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of the Company's compensation and benefit plans, programs or arrangements
as in effect immediately prior to the Date of Termination or, if more favorable
to the Executive, as in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason.
5.3 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay to the
Executive the Executive's normal post-termination compensation and benefits as
such payments become due. Such post-termination compensation and benefits shall
be determined under, and paid in accordance with, the Company's retirement,
insurance and other compensation or benefit plans, programs and arrangements as
in effect immediately prior to the Date of Termination or, if more favorable to
the Executive, as in effect immediately prior to the occurrence of the first
event or circumstance constituting Good Reason.
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6. Severance Payments.
6.1 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 or Disability, or (C) by the Executive without Good Reason, or
(ii) the Executive voluntarily terminates his employment for any reason during
the one-month period commencing on the first anniversary of the Change in
Control, then, in either such case, 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 prior to a Change in Control (whether or not a Change in Control
ever occurs) and such termination was at the request or direction of a Person
who has entered into an agreement with the Company the consummation of which
would constitute a Change in Control, (ii) the Executive terminates his
employment for Good Reason prior to a Change in Control (whether or not a Change
in Control ever occurs) and the circumstance or event which constitutes Good
Reason occurs at the request or direction of such Person, or (iii) the
Executive's employment is terminated by the Company without Cause or by the
Executive for Good Reason and such termination or the circumstance or event
which constitutes Good Reason is otherwise in connection with or in anticipation
of a Change in Control (whether or not a Change in Control ever occurs). For
purposes of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Executive shall be presumed to be
correct unless the Company establishes to the Board by clear and convincing
evidence that such position is not correct.
(A) In lieu of any further salary payments to the Executive
for periods subse-
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quent to the Date of Termination and in lieu of any severance benefit
otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to three times
the sum of (i) the Execu tive's base salary as in effect immediately
prior to the Date of Termination or, if higher, in effect immediately
prior to the first occurrence of an event or circumstance constituting
Good Reason, and (ii) the Executive's "target bonus" (i.e., the
Executive's "opportunity incentive target" bonus multiplied by the
"target" factor, which for 1998 is 1.4) pursuant to the Company's
Management Compensation Plan or any successor thereto in respect of the
fiscal year in which occurs the Date of Termination or, if higher, the
fiscal year in which occurs the first event or circumstance
constituting Good Reason.
(B) For the thirty-six (36) month period immediately following
the Date of Termination, the Company shall arrange to provide the
Executive and his dependents life, disability, accident and health
insurance benefits substantially similar to those provided to the
Executive and his dependents immediately prior to the Date of
Termination or, if more favorable to the Executive, those provided to
the Executive and his dependents immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, at no
greater cost to the Executive than the cost to the Executive
immediately prior to such date or occurrence; provided, however, that,
unless the Executive consents to a different method (after taking into
account the effect of such method on the calculation of "parachute
payments" pursuant to Section 6.2 hereof), such health insurance
benefits shall be provided through a third-party insurer. Benefits
otherwise receivable by the Executive pursuant to this Section 6.1 (B)
shall be reduced to the extent benefits of the same type are received
by or made available to the Executive during the thirty-six (36) month
period following the Executive's termination of employment (and any
such benefits received by or
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made available to the Executive shall be re ported to the Company by
the Executive); provided, however, that the Company shall reimburse the
Executive for the excess, if any, of the cost of such benefits to the
Executive over such cost immediately prior to the Date of Termination
or, if more favorable to the Executive, the first occurrence of an
event or circumstance constituting Good Reason.
(C) 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 excess of (i) the actuarial equivalent of the
aggregate retirement pension (taking into account any early retirement
subsidies associated therewith and determined as a straight life
annuity commencing at the date (but in no event earlier than the third
anniversary of the Date of Termination) as of which the actuarial
equivalent of such annuity is greatest) which the Executive would have
accrued under the terms of all Pension Plans (without regard to any
amendment to any Pension Plan made subsequent to a Change in Control
and on or prior to the Date of Termination, which amendment adversely
affects in any manner the computation of retirement benefits
thereunder), determined as if the Executive were fully vested
thereunder and had accumulated (after the Date of Termination)
thirty-six (36) additional months of service credit thereunder and had
been credited under each Pension Plan during such period with
compensation equal to the Executive's compensation (as defined in such
Pension Plan) during the twelve (12) months immediately preceding Date
of Termination or, if higher, during the twelve months immediately
prior to the first occurrence of an event or circumstance constituting
Good Reason, over (ii) the actuarial equivalent of the aggregate
retirement pension (taking into account any early retirement subsidies
associated therewith and determined as a straight life annuity
commencing at the date (but in no event earlier than the Date of
Termination) as of which the actuarial
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equivalent of such annuity is greatest) which the Executive had accrued
pursuant to the provisions of the Pension Plans as of the Date of
Termination. For purposes of this Section 6.1(C), "actuarial
equivalent" shall be determined using the same assumptions utilized
under the Company's Salaried Employees' Pension Plan immediately prior
to the Date of Termination. or, if more favorable to the Executive,
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason."
(D) The Company shall provide the Executive with outplacement
services suitable to the Executive's position for a period of three
years or, if earlier, until the first acceptance by the Executive of an
offer of employment.
6.2 (A) Whether or not the Executive becomes entitled to the Severance
Payments, if any of the payments or benefits received or to be received by the
Executive in connection with a Change in Control or the Executive's termination
of employment (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any Person whose actions result
in a Change in Control or any Person affiliated with the Company or such Person)
(such payments or benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the "Total Payments") will be subject to the Excise Tax, the
Company shall pay to the Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of any
Excise Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to
the Total Payments.
(B) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) all of the Total Payments shall be treated as
"parachute payments" (within the meaning of section 280G(b)(2) of the
Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably
acceptable to the Executive and selected by the accounting firm which
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was, immediately prior to the Change in Control, the Company's
independent auditor (the "Auditor"), such payments or benefits (in
whole or in part) do not constitute parachute payments, including by
reason of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute
payments" within the meaning of section 280G(b)(l) of the Code shall be
treated as subject to the Excise Tax unless, in the opinion of Tax
Counsel, such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered (within the
meaning of section 280G(b)(4)(B) of the Code) in excess of the Base
Amount allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash benefits
or any deferred payment or benefit shall be determined by the Auditor
in accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income tax at the highest
marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and locality of the
Executive's residence on the Date of Termination (or if there is no
Date of Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section 6.2), net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
(C) In the event that the Excise Tax is finally determined to
be less than the amount taken into account hereunder in calculating the
Gross-Up Payment, the Executive shall repay to the Company, within five
(5) business days following the time that the amount of such reduction
in the Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and
local income and employment taxes imposed on the Gross-Up Payment being
repaid by the Executive, to the extent that such repayment results in a
reduction in the Excise Tax and a dollar-for-dollar reduction in the
Executive's taxable income and wages for purposes of federal, state
and local income and employment taxes,
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plus interest on the amount of such repayment at 120% of the rate
provided in section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by reason of
any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with respect
to such excess) within five (5) business days following the time that
the amount of such excess is finally determined. The Executive and the
Company shall each reasonably cooperate with the other in connection
with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the
Total Payments.
6.3 The payments provided in subsections (A) and (C) of Section 6.1
hereof and in Section 6.2 hereof shall be made not later than the fifth day
following the Date of Termination; provided, however, that if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Executive or, in the case of payments under Section 6.2 hereof, in
accordance with Section 6.2 hereof, of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such payments when due) at 120%
of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company (together with interest at
120% of the rate provided in section 1274(b)(2)(B) of the Code). 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
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which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has
received from Tax Counsel, the Auditor or other advisors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
6.4 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5) business
days after delivery of the Executive's written requests for payment accompanied
with such evidence of fees and expenses incurred as the Company reasonably may
require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and during the
Term, any purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with Section 10 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is required
to include a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before
the Board) finding that, in the good
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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, however, that the Date of Termination shall be extended by a notice of
dispute given by the Executive only if such notice is given in good faith and
the Executive pursues the resolution of such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination occurs
following a Change in
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Control and during the Term and the Date of Termination is extended in
accordance with Section 7.3 hereof, the Company shall continue to pay the
Executive the full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, salary) and continue the
Executive as a participant in all compensation, benefit and insurance plans in
which the Executive was participating when the notice giving rise to the dispute
was given, 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
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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 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:
Xxxxxxxxx Company, Inc.
X.X. Xxx 0000
Xxxxxxxxxxx
Xxxxxxxxx 00000-0000
Attention: General Counsel
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged
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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, including the
Management Agreement entered into between the Company and the Executive,
effective as of [, as amended as of ]; provided, however,
that this Agreement shall supersede any agreement setting forth the terms and
conditions of the Executive's employment with the Company only in the event that
the Executive's employment with the Company is terminated on or following a
Change in Control, by the Company other than for Cause or by the Executive other
than for Good Reason. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Delaware. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
this Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without limitation,
those under Sections 6 and 7 hereof) shall survive such expiration.
12. Validity. 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
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shall be deemed to be an original but all of which together will constitute one
and the same instrument.
14. Settlement of Disputes; Arbitration. 14.1 All claims by the
Executive for benefits under this Agreement shall be directed to and determined
by the 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 Minneapolis,
Minnesota 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.
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(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the
Executive to substantially perform the Executive's duties with the
Company (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination for
Good Reason by the Executive pursuant to Section 7.1 hereof) after a
written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner
in which the Board believes that the Executive has not substantially
performed the Executive's duties, or (ii) the willful engaging by the
Executive in conduct which is demonstrably and materially injurious to
the Company or its subsidiaries, monetarily or otherwise. For purposes
of clauses (i) and (ii) of this definition, (x) no act, or failure to
act, on the Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company
that Cause exists shall be given effect unless the Company establishes
to the 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
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Company 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 stockholders was
approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or
recommended; or
(III) there is consummated a merger or consolidation
of the Company or any direct or indirect subsidiary of the
Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding
securities under an
17
employee benefit plan of the Company or any subsidiary of the
Company, at least 60% of the combined voting power of the
securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the
Company's then outstanding securities; or
(IV) the stockholders of the Company approve a plan
of complete liquidation or dissolution of the Company or there
is consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at
least 60% of the combined voting power of the voting
securities of which are owned by stockholders of the Company
in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred by virtue of the consummation of any
transaction or series of integrated transactions immediately following
which the record holders of the common stock of the Company
immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an
entity which owns all or substantially all of the assets of the Com-
18
pany immediately following such transaction or series of transactions.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "Company" shall mean Xxxxxxxxx Company, 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 refer-
19
ences in paragraphs (I) through (VII) below to a "Change in Control" as
references to a "Potential Change in Control"), of any one of the
following acts by the Company, or failures by the Company to act,
unless, in the case of any act or failure to act described in paragraph
(I), (V), (VI) or (VII) below, such act or failure to act is corrected
prior to the Date of Termination specified in the Notice of Termination
given in respect thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior
executive officer of the Company or a substantial adverse
alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the
Change in Control, including without limitation (if the
Executive is an executive officer of the Company immediately
prior to the Change in Control) ceasing to be an executive
officer of a public company;
(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 more than 25 miles from the
Executive's principal place of employment immediately prior to
the Change in Control or the Company's requiring the Executive
to be based anywhere other than such principal place of
employment (or permitted relocation thereof) except for
required travel on the Company's business to an extent
substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Company to pay to the
Executive any portion of the Executive's current compensation
except pursuant to an across-the-board compensation deferral
similarly affecting all se-
20
nior executives of the Company and all senior executives of
any Person in control of the Company, or to pay to the
Executive any portion of an installment of deferred
compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation
is due;
(V) the failure by the Company to continue in effect
any compensation plan in which the Executive participates
immediately prior to the Change in Control which is material
to the Executive's total compensation, including but not
limited to the Company's equity compensation plans, annual
incentive bonus plan, long-term compensation plan, 401(k)
excess plan, excess pension plan, supplemental executive
pension plan, and deferred stock option gain 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;
(VI) the failure by the Company to continue to
provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Company's
pension, savings, life insurance, medical, health and
accident, or disability plans in which the Executive was
participating immediately prior to the Change in Control
(except for across the board changes similarly affecting all
senior executives of the Company and all
21
senior executives of any Person in control of the Company),
the taking of any other action by the Company which would
directly or indirectly materially reduce any of such benefits
or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Change in Control,
or the failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is
entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect
at the time of the Change in Control; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1
hereof; for purposes of this Agreement, no such purported
termination shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due
to physical or mental illness. The Executive's continued employment
shall not constitute consent to, or a waiver of rights with respect to,
any act or failure to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Executive that Good Reason exists shall
be presumed to be correct unless the Company establishes to the 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
22
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.
(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 stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company.
(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 di rectly from the Company or its
affiliates); or
23
(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 be deemed the reason for the
termination by the Executive of the Executive's employment if such
employment is terminated in accordance with the Company's retirement
policy, including early retirement, generally applicable to its
salaried employees.
(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).
(Y) "Total Payments" shall mean those payments so described in
Section 6.2 hereof.
XXXXXXXXX COMPANY, INC.
By:
--------------------------------------
Name: Xxxxxxx X. Xxx Xxxx
Title: Chairman, Chief Executive
Officer and President
---------------------------------------
[name and address of
Executive]
24
