EXECUTIVE COMPENSATION AND BENEFITS AGREEMENT
Exhibit
10(iii)(A)
This
Executive Compensation and Benefits Agreement (this “Agreement”) is entered into
on April 6, 2009, between Drew Industries Incorporated, a Delaware corporation
(the “Company”) and Xxxxx X. Xxxxxx (the “Executive”).
WITNESSETH:
WHEREAS,
the Executive was Chief Executive Officer of the Company from 1984 to December
31, 2008 and has made substantial contributions to the development and success
of the Company in key managerial positions since 1969; and
WHEREAS,
the Executive was appointed Chairman of the Board of Directors of the Company,
effective January 1, 2009; and
WHEREAS,
the Company and the Executive have agreed on certain compensation and benefits
to be provided to the Executive in connection with the change in his position
and responsibilities with the Company pursuant to the Company’s executive
succession plan; and
WHEREAS,
the duties and obligations of the Company to the Executive under this Agreement
shall be in consideration for the Executive’s past services to the Company, the
Executive’s continued services to the Company, and the restrictive covenants and
release included in this Agreement; and
WHEREAS,
the terms and conditions of this Agreement were reviewed and approved by the
Board of Directors of the Company and the Compensation Committee of
the Board of Directors;
NOW,
THEREFORE, in consideration of the mutual covenants contained herein, the
Company and the Executive agree as follows:
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1.
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Effective Date and
Term
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This
Agreement shall become effective as of January 1, 2009 (the “Effective Date”)
and shall terminate on December 31, 2013 (the “Termination Date”).
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2.
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Definitions
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For
purposes of this Agreement, capitalized terms shall be defined as
follows:
“Affiliated
Companies” shall mean the Company and its subsidiaries and affiliates (as the
term “affiliate” is defined in the Federal securities laws).
“Base
Salary” shall mean the Executive’s annual salary, exclusive of benefits, stock
options, bonuses, and incentive compensation, in effect on the Retirement
Date.
“Company”
shall mean Drew Industries Incorporated and its successors and assigns, and any
corporation or other entity which is the surviving or continuing entity
following a merger, consolidation, or sale of all or substantially all of the
Company’s assets or stock, or any other reorganization or recapitalization, and
any successor to the business conducted by the Affiliated Companies on the
Retirement Date.
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3.
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Compensation
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3.1 Commencing
as of the Effective Date, for 2009, the Company will pay to the Executive (i)
Base Salary of $400,000 plus (ii) with respect to the Company’s 2009 results of
operations, incentive compensation equal to 85% of the amount (the “Formula
Payment”) that would have been paid to the Executive applying the incentive
compensation formula in effect for The Executive for 2008, subject to
adjustment, consistent with prior years, for acquisitions consummated by the
Company since January 1, 2008.
3.2 For
2010, the Company will pay to the Executive (i) Base Salary of $400,000 plus
(ii) with respect to the Company’s 2010 results of operations, incentive
compensation equal to 75% of the Formula Payment, subject to adjustment,
consistent with prior years, for acquisitions consummated by the Company since
January 1, 2008.
3.3 For
the quarter ending March 31, 2011, the Company will pay to the Executive (i)
Base Salary at the annual rate of $400,000 plus (ii) with respect to the
Company’s results of operations for the year 2011, pro-rata incentive
compensation equal to 75% of the Formula Payment, subject to adjustment,
consistent with prior years, for acquisitions consummated by the Company since
January 1, 2008.
3.4 Commencing
January 1, 2011, and continuing throughout the period during which the Executive
serves as a Director of the Company, the Executive will receive the same rate of
compensation paid to the Chairman of the Board of Directors consistent with the
Company’s past practices notwithstanding that he may not be considered
“independent” in accordance with the standards of the New York Stock
Exchange.
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4.
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Benefits
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4.1 Commencing
January 1, 2009 through December 31, 2013 (the “Benefits Period”), the Executive
will continue to receive the benefits and perquisites, equivalent in nature and
amount, that he received through December 31, 2008, including the following
benefits and perquisites (“Benefits”):
4.1.1 Medical
and health insurance group benefits for the Executive and his
family;
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4.1.2 Dental
coverage for the Executive and his family;
4.1.3 Automobile
and related expenses for insurance, fuel, maintenance and parking;
4.1.4 Taxable
bonus payment in the amount of $30,000 required to be invested in tax-deferred
annuity or cash value life insurance to provide retirement income;
4.1.5 The
remaining three annual payments of premiums for long-term care insurance due,
respectively, on May 15, 2009, May 15, 2010 and May 15, 2011.
4.1.6 Long-term
disability insurance;
4.1.7 The
statutory maximum matching contribution to the Company’s 401(k) plan until the
Executive is no longer eligible to participate in the 401(k) plan or until
December 31, 2013, whichever occurs first;
4.1.8 Use
of Company-provided computer, e-mail account and cellular
telephone;
4.1.9 The
Executive has the option to terminate or assume the split-dollar life insurance
policies with National Life Insurance Company of Vermont (Policy
Nos. 1874566 and 2007722 currently in effect, and in accordance with
the split-dollar life insurance agreement the Company shall receive an amount
equivalent to the premiums paid thereon, and the Executive shall receive the
remaining cash value if the policies are terminated, or death benefits if
assumed.
4.1.10 Upon
request by the Executive, the Company will consider providing office space and
secretarial services, but only to the extent available from the Company’s
existing facility and personnel.
4.2 All
stock options held by the Executive as of the Effective Date shall continue to
vest during the Benefits Period in accordance with the terms of the applicable
Stock Option Plan and Stock Option Agreement(s) (including any successor plan
and agreement) under which the stock options were granted to the
Executive. Grants of stock options for the years 2009 and 2010 shall
be at the discretion of the Board of Directors. Commencing 2011,
grants of options shall be equivalent to grants made to other non-employee
Directors.
4.3 In
the event that applicable laws or regulations prohibit the Company from
providing the foregoing Benefits, or result in penalties or excess tax imposed
on the Company, the Company may withhold any such Benefits and the Company will
pay the Executive an amount equal to the cost incurred by the Executive to
replace the Benefit or Benefits withheld, plus an amount equal to the tax for
which the Executive becomes liable as a result of payment of the cost of
replacement.
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4.4 The
Company’s obligation to provide, and the Executive’s right to receive, any of
the Benefits described in this Section 4 are conditioned on, and are in partial
consideration for, (i) the Executive’s release of any claims he may have against
the Company in connection with his employment with the Company as set forth in
Section 7 hereof; and (ii) the Executive’s continued compliance with any
obligations he may have to the Company under this Agreement, including but not
limited to, the restrictive covenants set forth in Section 6
hereof.
4.5 All
payments made by the Company to the Executive under this Agreement shall be net
of any applicable taxes (local, state, federal or otherwise) or other required
or voluntary withholding or deductions.
4.6 The
Executive shall not be required to mitigate the amount of any payment or Benefit
provided under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment or Benefit provided for under this Agreement be
reduced by any compensation earned by the Executive as a result of employment by
another employer or by any other benefits received by the Executive during the
term of this Agreement.
4.7 In
the event of the death of the Executive prior to the Termination Date, (i) the
Company shall continue to pay to the beneficiary or heir of the Executive the
Base Salarywhich the Executive would have been entitled to receive until the
Termination Date, (ii) medical, health and dental insurance group benefits for a
period of eighteen (18) months from the date of death or until the Termination
Date, whichever is longer. Unless superseded by notice to the Company subsequent
to the Effective Date, all payments of Base Salary shall be made to the
Executive’s spouse in the event of the Executive’s death, or to his estate in
the event the Executive is predeceased by his spouse.
4.8 In
the event the Executive becomes disabled, during the term of this Agreement, the
Executive shall be entitled to receive, in accordance with the customary payroll
practices of the Company, an amount equal to the difference between the Base
Salary, incentive compensation, and cost of Benefits provided pursuant to this
Agreement over the amount of disability payments received by the Executive
pursuant to disability insurance provided pursuant to this
Agreement.
4.9
This Agreement is intended to comply with Section 409A of the Internal Revenue
Code of 1986, as amended (the ‘Code’), the final Treasury regulations and the
interpretative guidance thereunder, including the exceptions for short-term
deferrals, separation pay arrangements, reimbursements, and in-kind
distributions, and shall be construed, interpreted and administered
accordingly. If any provision of this Agreement needs to be revised
to satisfy the requirements of Section 409A, then such provision shall be
modified or restricted to the extent and in the manner necessary to be in
compliance with such requirements of the Code and any such modification will
attempt to maintain the same economic results as were intended under this
Agreement. The Company does not guarantee that the payments and
benefits that may be paid or provided pursuant to this Agreement will satisfy
all applicable provisions of Code Section 409A. Payments made to the
Executive under this Agreement in error shall be returned to the
Company.
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4.9.1 Notwithstanding
anything herein to the contrary, if at the time of the Executive’s “Separation
From Service” (as hereinafter defined) the Executive shall be a “specified
employee” (within the meaning of Treasury Regulation 1.409A-1(i)), as determined
in a uniform manner by the Company, and the Company makes a good faith
determination that an amount payable hereunder constitutes deferred compensation
(within the meaning of Section 409A of the Code), such amount payable to the
Executive shall not be paid or commence until the first business day
after six months following the Executive’s “Separation From Service” or, if
earlier, the date of the Executive’s death (the “Six Month Delay
Rule”). The term “Separation From Service” shall mean the Executive’s
termination of active employment, whether voluntary or involuntary (other than
by death) with the Company or any of its affiliated companies within the meaning
of Treasury Regulation 1.409A-1(h). The Company will determine
whether the Executive has terminated active employment (and incurred a
Separation From Service) based upon facts and circumstances described in
Treasury Regulation 1.409A-1(h)(1)(ii). The Executive shall incur a
Separation From Service if the Company and the Executive reasonably anticipate
the Executive will not perform any additional services after a certain date or
that the level of bona fide services (as an employee or an independent
contractor) will permanently decrease to no more than twenty (20%) percent of
the average level of bona fide services performed over the immediately preceding
36-month period. The provisions of this Section 4.8.1 shall only
apply if, and to the minimum extent, necessary to comply with Section 409A of
the Code, to avoid the Executive’s incurrence of any additional taxes or
penalties under Section 409A.
4.9.2 During
the Six Month Delay, the Company will make payments to the Executive under the
Agreement only to the extent any of the exceptions to the Six Month Delay Rule
apply, determined in good faith by the Company, including the short-term
deferral rule, the separation pay exception, and the limited payments
exception.
4.9.3
The Company’s ‘specified employee identification date’ will be December 31 of
each year, and the Company’s ‘specified employee effective date’ will be April 1
of each succeeding year.
4.9.4 Reimbursement
of fees, expenses, allowances, and in-kind benefits provided under this
Agreement shall be made (i) in accordance with the Company’s policies, and (ii)
within such time periods required by Code Section 409A to avoid being deemed
deferred compensation.
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5.
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Executive’s
Services
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5.1 Unless
the Executive shall become ineligible or unfit (in the reasonable discretion of
the Board of Directors) to serve as a Director of the Company, (i) the Executive
will be nominated for election at each annual meeting of the Company’s
stockholders, (ii) the Company will request that the Corporate Governance
Committee of the Board of Directors consider waiving the mandatory retirement
age for Directors with respect to the Executive, and (iii) immediately following
the annual meeting of stockholders in 2009, the Executive will be re-appointed
Chairman of the Board of Directors; provided, however, that nothing in this
Section 5.1 shall be construed in any way to limit or prohibit any Director of
the Company from exercising his duties or performing his responsibilities as a
Director pursuant to applicable law, and no claim against the Company or any
Director in favor of the Executive shall arise therefrom.
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5.2 Commencing
January 1, 2009, in addition to the normal duties and responsibilities of
Chairman of the Board of Directors, on request by the Company with reasonable
notice to the Executive, the Executive will consult with and advise the
President and Chief Executive Officer of the Company regarding all aspects of
the Company’s operations, particularly with respect to acquisitions and
management personnel, and will participate and represent the Company in
industry-related functions, and investor relations.
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6.
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Non-Competition-Corporate
Property-Confidential
Information
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6.1 For
a period of five (5) years from the Effective Date, (the “Restricted Period”),
the Executive will not, directly or indirectly, undertake or perform services in
or for, or render services to, participate in, or have financial interest in, or
engage in, any business competitive to that of the business of the Affiliated
Companies or solicit for employment or employ any employee of the Affiliated
Companies. For purposes hereof, a business shall be deemed
competitive if it is conducted in any geographic or market area in which any of
the Affiliated Companies are engaged in business during the Restricted Period
and involves the development, design, manufacture, marketing, packaging, sale or
distribution of any products developed, designed, manufactured, sold or
distributed, or the offering of any services offered, by any of the Affiliated
Companies, whether on the date hereof or as of the Effective Date including, but
not limited to, products for the manufactured housing (including park and office
models), modular housing, recreational vehicle, and utility trailer industries;
and the Executive will be deemed directly or indirectly to engage in such
business if the Executive, or any member of his immediate family, participates
in such business, or in any entity engaged in or which owns, such business, as
an officer, director, employee, consultant, partner, individual proprietor,
manager or as an investor who has made any loans, contributed to capital stock
or purchased any stock; provided further, however, that the Executive will not,
at any time, utilize any tradenames or corporate names used by the Affiliated
Companies, or any derivatives of such names, in any business competitive to that
of the business of the Affiliated Companies, nor any patent, trademark,
tradename, service xxxx, logo, copyright or similar intellectual property,
whether or not registered, of any of the Affiliated Companies. The
foregoing, however, shall not be deemed to prevent the Executive from investing
in securities if such class of securities in which the investment is made is
listed on a national securities exchange or is of a Company registered under
Section 12(g) of the Securities Act of 1934 and, if the Company in which such
investment is made competes with any of the Affiliated Companies, such
investment represents less than one (1%) per cent of the outstanding securities
of such class.
6.2 The
Executive agrees that all products, packaging, inventions, patents, patent
applications, designs, creations, ideas, techniques, methods, or any portions
thereof, or any improvements or modifications thereon, or any know-how or
procedures related thereto, which relate to the business of the Affiliated
Companies, conceived, invented, discovered or executed by the Executive, whether
or not marketed or utilized by the Affiliated Companies, shall be sole and
exclusive property of the Affiliated Companies, without additional compensation
payable thereof; and by these presents the Executive hereby assigns to the
Company any and all right, title and interest he has, or may have,
therein.
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6.3 The
Executive acknowledges and agrees that during, and as a consequence of
employment with the Company, he has learned confidential, proprietary and trade
secret information of and about the Affiliated Companies, and has had access to
and has been involved in the development and utilization of the Affiliated
Company’s confidential and proprietary business information. “Confidential
Information” means information about the Affiliated Companies in whatever form
disclosed or known to the Executive as a consequence of his employment by the
Company which relates to the Affiliated Companies’ business, products,
processes, or services that gives them a competitive advantage in the
marketplace, including, but not limited to: (a) any information that would be
considered a trade secret within the meaning of applicable Federal or state law;
(b) information relating to any of the Affiliated Companies’ existing products
or services or products or services under development; (c) business information
relating to the Affiliated Companies’ dealings with customers or suppliers; (d)
confidential customer or prospective customer lists; (e) costs, pricing and
profit margins; (f) confidential marketing and advertising programs; (g)
financial information; (h) sales performance and strategies; (i) human resources
strategies; (j) merger and acquisition plans; and (k) proprietary software or
processes utilized by the Affiliated Companies. Confidential
Information does not include information that the Executive can prove was
generally known and readily available to the Affiliated Companies’ competitors
through legitimate means. The Executive agrees that he will not,
either during employment with the Company or at any time after the Effective
Date, disclose to anyone (except as authorized by the Company in furtherance of
its business), publish, or use in competition with the Affiliated Companies, any
of their Confidential Information. The Executive further agrees to
abide by the Company’s rules or regulations it may implement from time to time
to further protect its Confidential Information.
6.4 In
the event that the Executive desires to render services to, or have any interest
in, a supplier or customer of any of the Affiliated Companies, the Executive
shall furnish to the Company and the Board of Directors a detailed description
of the prospective employer’s business, including the business relationship with
any of the Affiliated Companies. Acceptance by the Executive of any
such relationship with a supplier or customer of any of the Affiliated Companies
is conditioned on the consent of the Company, which shall not be unreasonably
withheld or delayed.
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7.
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Release
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7.1 Except
for the obligations of the Company set forth in this Agreement, the Executive
hereby releases, acquits and forever discharges the Company, its subsidiaries,
and their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed (other than any claim for
indemnification the Executive may have as a result of any third party action
based on his employment with the Company), arising out of, or in any way related
to, agreements, events, acts, omissions or conduct at any time prior to the
Effective Date, including arising out of or in any way connected with his
employment with the Company, including but not limited to, claims of intentional
and negligent infliction of emotional distress, any and all tort claims for
personal injury, claims or demands related to salary, bonuses, commissions,
stock, stock options, or any other ownership interests in the Company, vacation
pay, fringe benefits, expense reimbursements, severance pay, or any other form
of compensation; claims pursuant to any federal, state or local law or cause of
action including, but not limited to, the federal Civil Rights Act of 1964, as
amended; the federal Age Discrimination in Employment Act of 1967, as amended
(“ADEA”); the federal Employee Retirement Income Security Act of 1974, as
amended; the federal Americans with Disabilities Act of 1990; tort law; contract
law; statutory law; common law; wrongful discharge; discrimination; fraud;
defamation; emotional distress; and breach of the implied covenant of good faith
and fair dealing; provided, however, that nothing in this Section 7.1 shall be
construed in any way to release the Company from its obligation to indemnify the
Executive pursuant to the Indemnification Agreement between the Executive and
the Company, and the Company’s indemnification obligations pursuant to the
Company’s Restated Certificate of Incorporation and By-laws, or applicable law,
or applicable directors and officers liability insurance maintained by the
Company with respect to the Executive’s services as a Director of the
Company.
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7.2 Nothing
in this Agreement shall result in cancellation or termination of any rights of
the Executive in employee benefits which have vested on or prior to the date
hereof.
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8.
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General
Provisions
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8.1 This
Agreement does not constitute a contract of employment or impose upon the
Executive any obligation to remain as an employee, or impose on the Company any
obligation (i) to retain the Executive as an employee, (ii) to change the status
of the Executive as an at-will employee, or (iii) to change the Company’s
policies regarding termination of employment. In the event of any
conflict between the provisions of this Agreement and the provisions of any
previously existing employment, severance or other similar agreement or
arrangement, the provisions of this Agreement shall govern.
8.2 Whenever
possible, each provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law. If any provision of
this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision, or any other
jurisdiction, but this Agreement will be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provisions had
never been contained herein.
8.3 The
waiver of any breach of any provision of this Agreement, shall not thereby be
deemed to have waived any preceding or succeeding breach of the same or any
other provision of this Agreement.
8.4 This
Agreement constitutes the entire agreement between the Executive and the Company
with regard to the subject matter hereof.
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8.5 This
Agreement may be changed or terminated only upon the mutual written consent of
the Company and the Executive. The written consent of the Company to
a change or termination of this Agreement, other than changes for administrative
purposes, shall be signed by an executive officer of the Company after approval
by the Board of Directors.
8.6 This
Agreement may be executed in separate counterparts, any one of which need not
contain signatures of more than one party, but all of which taken together will
constitute one and the same Agreement.
8.7 The
headings of the Sections hereof are inserted for convenience only and shall not
be deemed to constitute a part therefore nor to affect the meaning
thereof.
8.8 This
Agreement is intended to bind and to inure to the benefit of and be enforceable
by the Executive, and the Company, and any surviving entity resulting from a
merger, acquisition, consolidation or other reorganization or recapitalization,
and any successor to the businesses formerly conducted by the Company, and their
respective successors, assigns, heirs, executors and administrators, without
regard to whether or not such entity or person actively assumes any rights or
duties hereunder; provided, however, that Executive may not assign any duties
hereunder and may not assign any rights hereunder without the written consent of
the Company, which consent shall not be unreasonably withheld.
8.9 All
notices provided for in this Agreement, and correspondence pertaining to this
Agreement, shall be considered as properly given when (a) mailed by U.S.
registered mail, return receipt requested, postage prepaid; (b) sent via
facsimile with a confirmed facsimile transmission receipt; (c) hand delivered to
the Executive or to the Chief Executive Officer of the Company; or
(d) sent via overnight delivery with a confirmed receipt of delivery; in each
instance addressed, if to the Executive or the Company, as the case may be, at
the address noted below or to such other address as either party may furnish to
the other in writing in accordance herewith, except that notice of a change of
address shall be effective only upon actual receipt.
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To
the Company:
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To
the Executive:
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Drew
Industries Incorporated
000
Xxxxxxxxxx Xxxxxx
Xxxxx
Xxxxxx, Xxx Xxxx, 00000
Attention: Chief
Executive Officer
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Xxxxx
X. Xxxxxx
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8.10 In
any proceeding arising out of or involving a dispute or disagreement with
respect to this Agreement, the prevailing party (on the merits, by motion, or
otherwise) shall be entitled to be reimbursed by the other party for all legal
fees and expenses incurred in connection with such proceeding.
8.11 This
Agreement is made and entered into in the State of New York, and the internal
laws of New York shall govern its validity and interpretation in the performance
by the parties hereto of their respective duties and obligation hereunder,
without regard to New York’s conflict of laws rules. Each party
hereto irrevocably submits to the exclusive jurisdiction of the United States
District Court located in White Plains, New York over any suit, action or
proceeding arising out of or relating to this Agreement. Each party,
hereby irrevocably waives to the fullest extent permitted by law, (i) any
objection that they may now or hereafter have to the venue of any such suit,
action or proceeding in such court; or (ii) any claim that any such suit, action
or proceeding has been brought in an inconvenient forum. Final
judgment in any suit, action or proceeding brought in any such court shall be
conclusive and binding upon each party duly served with process therein and may
be enforced in the courts of the jurisdiction of which either party or any of
their property is subject, by a suit upon such judgment.
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IN
WITNESS WHEREOF, the parties have executed this Agreement on the Effective Date
written above.
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Xxxxx
X. Xxxxxx
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DREW
INDUSTRIES INCORPORATED
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By:
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Xxxxxxx
X. Xxxx
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Title:
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President
and Chief Executive Officer
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