FORM OF KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
Exhibit
10.6
FORM
OF
THIS AGREEMENT, made and
entered into as of the _____day of ________, 200_, by and between Regal-Beloit
Corporation, a Wisconsin corporation (hereinafter referred to as the “Company”),
and [_______________] (hereinafter referred to as the “Executive”).
W I T N E S S E T H
WHEREAS, the Executive is
employed by the Company and/or a subsidiary of the Company (hereinafter referred
to collectively as the “Employer”) in a key executive capacity and the
Executive’s services are valuable to the conduct of the business of the
Company;
WHEREAS, the Company desires
to continue to attract and retain dedicated and skilled management employees in
a period of industry consolidation, consistent with achieving the best possible
value for its shareholders in any change in control of the Company;
WHEREAS, the Company
recognizes that circumstances may arise in which a change in control of the
Company occurs, through acquisition or otherwise, thereby causing a potential
conflict of interest between the Company’s needs for the Executive to remain
focused on the Company’s business and for the necessary continuity in management
prior to and following a change in control, and the Executive’s reasonable
personal concerns regarding future employment with the Employer and economic
protection in the event of loss of employment as a consequence of a change in
control;
WHEREAS, the Company and the
Executive are desirous that any proposal for a change in control or acquisition
of the Company will be considered by the Executive objectively and with
reference only to the best interests of the Company and its shareholders;
WHEREAS, the Executive will be
in a better position to consider the Company’s best interests if the Executive
is afforded reasonable economic security, as provided in this Agreement, against
altered conditions of employment which could result from any such change in
control or acquisition;
WHEREAS, the Executive
possesses intimate knowledge of the business and affairs of the Company and has
acquired certain confidential information and data with respect to the Company;
and
WHEREAS, the Company desires
to insure, insofar as possible, that it will continue to have the benefit of the
Executive’s services and to protect its confidential information and
goodwill.
NOW, THEREFORE, in
consideration of the foregoing and of the mutual covenants and agreements
hereinafter set forth, the parties hereto mutually covenant and agree as
follows:
1. Definitions.
(a) 409A
Affiliate. The term “409A Affiliate” means each entity that is
required to be included in the Company’s controlled group of corporations within
the meaning of Section 414(b) of the Code, or that is under common control with
the Company within the meaning of Section 414(c) of the Code; provided, however, that the
phrase “at least 50 percent” shall be used in place of the phrase “at least 80
percent” each place it appears therein or in the regulations thereunder.
(b) Accrued
Benefits. The term “Accrued Benefits” shall include the
following amounts, payable as described herein: (i) all base salary for the
time period ending with the Termination Date; (ii) reimbursement for any
and all monies advanced in connection with the Executive’s employment for
reasonable and necessary expenses incurred by the Executive on behalf of the
Employer for the time period ending with the Termination Date; (iii) any
and all other cash earned through the Termination Date and deferred at the
election of the Executive or pursuant to any deferred compensation plan then in
effect; (iv) notwithstanding any provision of any bonus or incentive
compensation plan applicable to the Executive, but subject to any deferral
election then in effect, a lump sum amount, in cash, equal to the sum of
(A) any bonus or incentive compensation that has been allocated or awarded
to the Executive for a fiscal year or other measuring period under the plan that
ends prior to the Termination Date but has not yet been paid (pursuant to Section 5(f) or
otherwise) and (B) a pro rata portion to the Termination Date of the
aggregate value of all contingent bonus or incentive compensation awards to the
Executive for all uncompleted periods under the plan calculated as to each such
award as if the Goals with respect to such bonus or incentive compensation award
had been attained at the target level (reduced, but not below zero, by amounts
paid under all such contingent bonus or incentive compensation awards upon the
Change in Control of the Company to the extent such amounts relate to the same
period of time); and (v) all other payments and benefits to which the
Executive (or in the event of the Executive’s death, the Executive’s surviving
spouse or other beneficiary) may be entitled on the Termination Date as
compensatory fringe benefits or under the terms of any benefit plan of the
Employer, excluding severance payments under any Employer severance policy,
practice or agreement in effect on the Termination Date. Payment of
Accrued Benefits shall be made promptly in accordance with the Company’s
prevailing practice with respect to clauses (i) and
(ii) or, with
respect to clauses (iii),
(iv) and (v), pursuant to the
terms of the benefit plan or practice establishing such benefits; provided that payments
pursuant to clause (iv)(B) shall be paid on the first day of the seventh month
following the month in which the Executive’s Separation from Service occurs,
unless the Executive’s Separation from Service is due to death, in which event
such payment shall be made within 90 days of the date of Executive’s
death.
(c) Act. The
term “Act” means the Securities Exchange Act of 1934, as amended.
(d) Affiliate and
Associate. The terms “Affiliate” and “Associate” shall have
the respective meanings ascribed to such terms in Rule l2b-2 of the General
Rules and Regulations under the Act.
(e) Annual Cash
Compensation. The term “Annual Cash Compensation” shall mean
the sum of (i) the Executive’s Annual Base Salary (determined as of the
time of the Change in Control of the Company or, if higher, immediately prior to
the date the Notice of Termination is given) plus (ii) an amount equal to
the greater of the Executive’s annual incentive target bonus for the fiscal year
in which the Termination Date occurs or the annual incentive bonus the Executive
received for the fiscal year prior to the Change in Control of the Company plus
(iii) an amount equal to the greater of the Executive’s Fringe Benefits for the
fiscal year in which the Termination Date occurs or the annual amount of Fringe
Benefits the Executive received for the fiscal year prior to the Change in
Control of the Company (the aggregate amount set forth in clause (i),
clause (ii) and
clause iii
shall hereafter be referred to as the “Annual Cash Compensation”).
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(f) Beneficial
Owner. A Person shall be deemed to be the “Beneficial Owner”
of any securities:
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(i)
which such Person or any of such Person’s Affiliates or Associates
has the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that
a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, (A) securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person’s Affiliates or
Associates until such tendered securities are accepted for purchase, or
(B) securities issuable upon exercise of Rights issued pursuant to
the terms of the Company’s Rights Agreement, dated as of January 28, 2000,
between the Company and Firstar Bank, N.A., as amended from time to time
(or any successor to such Rights Agreement), at any time before the
issuance of such securities;
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(ii)
which such Person or any of such Person’s Affiliates or Associates,
directly or indirectly, has the right to vote or dispose of or has
“beneficial ownership” of (as determined pursuant to Rule l3d-3 of
the General Rules and Regulations under the Act), including pursuant to
any agreement, arrangement or understanding; provided, however, that
a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, any security under this clause
(ii) as a result of an agreement, arrangement or understanding
to vote such security if the agreement, arrangement or understanding:
(A) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations under the
Act and (B) is not also then reportable on a Schedule l3D under
the Act (or any comparable or successor report);
or
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(iii)
which are beneficially owned, directly or indirectly, by any other Person
with which such Person or any of such Person’s Affiliates or Associates
has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as
described in clause (ii)
above) or disposing of any voting securities of the
Company.
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(g) Cause. “Cause”
for termination by the Employer of the Executive’s employment shall be limited
to any of the following: (i) the engaging by the Executive in intentional
conduct not taken in good faith that the Company establishes, by clear and
convincing evidence, has caused demonstrable and serious financial injury to the
Employer, as evidenced by a determination in a binding and final judgment, order
or decree of a court or administrative agency of competent jurisdiction, in
effect after exhaustion or lapse of all rights of appeal, in an action, suit or
proceeding, whether civil, criminal, administrative or investigative;
(ii) conviction of a felony (as evidenced by binding and final judgment,
order or decree of a court of competent jurisdiction, in effect after exhaustion
of all rights of appeal), which substantially impairs the Executive’s ability to
perform his duties or responsibilities; or (iii) continuing willful and
unreasonable refusal by the Executive to perform the Executive’s duties or
responsibilities (unless significantly changed without the Executive’s
consent).
(h) Change in Control of the
Company. A “Change in Control of the Company” shall be deemed to have
occurred if an event set forth in any one of the following paragraphs shall have
occurred:
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(i)
any Person (other than (A) the Company or any of its subsidiaries,
(B) a trustee or other fiduciary holding securities under any employee
benefit plan of the Company or any of its subsidiaries, (C) an underwriter
temporarily holding securities pursuant to an offering of such securities
or (D) a corporation owned, directly or indirectly, by the shareholders of
the Company in substantially the same proportions as their ownership of
stock in the Company (“Excluded Persons”) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not including
in the securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates after ____________,
200_, pursuant to express authorization by the Board that refers to this
exception) representing 20% 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 voting securities;
or
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(ii)
the following individuals cease for any reason to constitute a
majority of the number of directors of the Company then
serving: (A) individuals who, on __________, 200_ constituted
the Board and (B) any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose appointment or
election by the Board or nomination for election by the Company’s
shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on _________,
200_, or whose appointment, election or nomination for election was
previously so approved (collectively the “Continuing Directors”); provided, however, that
individuals who are appointed to the Board pursuant to or in accordance
with the terms of an agreement relating to a merger, consolidation, or
share exchange involving the Company (or any direct or indirect subsidiary
of the Company) shall not be Continuing Directors for purposes of this
Agreement until after such individuals are first nominated for election by
a vote of at least two-thirds (2/3) of the then Continuing Directors and
are thereafter elected as directors by the shareholders of the Company at
a meeting of shareholders held following consummation of such merger,
consolidation, or share exchange; and, provided further,
that in the event the failure of any such persons appointed to the Board
to be Continuing Directors results in a Change in Control of the Company,
the subsequent qualification of such persons as Continuing Directors shall
not alter the fact that a Change in Control of the Company occurred;
or
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(iii)
the shareholders of the Company approve a merger, consolidation or
share exchange of the Company with any other corporation or approve the
issuance of voting securities of the Company in connection with a merger,
consolidation or share exchange of the Company (or any direct or indirect
subsidiary of the Company) pursuant to applicable stock exchange
requirements, other than (A) a merger, consolidation or share exchange
which would result in the voting securities of the Company outstanding
immediately prior to such merger, consolidation or share exchange
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof) at least 50% of the combined voting power of the voting
securities of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger, consolidation or share
exchange, or (B) a merger, consolidation or share exchange effected to
implement a recapitalization of the Company (or similar transaction) in
which no Person (other than an Excluded Person) is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates after
__________, 200_, pursuant to express authorization by the Board that
refers to this exception) representing 20% 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 voting securities;
or
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(iv)
the shareholders of the Company approve of a plan of complete
liquidation or dissolution of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company’s
assets (in one transaction or a series of related transactions within any
period of 24 consecutive months), other than a sale or disposition by the
Company of all or substantially all of the Company’s assets to an entity
at least 75% of the combined voting power of the voting securities of
which are owned by Persons in substantially the same proportions as their
ownership of the Company immediately prior to such
sale.
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Notwithstanding
the foregoing, no “Change in Control of the Company” shall be deemed to have
occurred if there is consummated 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 own, directly or indirectly, in the same proportions as their
ownership in the Company, an entity that owns all or substantially all of the
assets or voting securities of the Company immediately following such
transaction or series of transactions.
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(i) Code. The
term “Code” means the Internal Revenue Code of 1986, including any amendments
thereto or successor tax codes thereof.
(j) Covered
Termination. Subject to Section 2(b),
the term “Covered Termination” means any Termination of Employment during the
Employment Period where the Termination Date, or the date Notice of Termination
is delivered, is any date prior to the end of the Employment
Period.
(k) Employment
Period. Subject to Section 2(b),
the term “Employment Period” means a period commencing on the date of a Change
in Control of the Company, and ending at 11:59 p.m. Central Time on the
earlier of the third anniversary of such date or the Executive’s Normal
Retirement Date.
(l) Fringe
Benefits. The term “Fringe Benefits” means the fair market
value of the fringe benefits payable to Executive by the Company (determined as
of the time of the Change in Control of the Company or, if higher, immediately
prior to the date the Notice of Termination is given). For these
purposes, Fringe Benefits include, but are not limited to club dues or
automobile reimbursement and do not include welfare benefits, such as medical
coverage (including prescription drug coverage), dental coverage, life
insurance, disability insurance and accidental death and dismemberment
benefits.
(m) Good
Reason. The Executive shall have “Good Reason” for termination
of employment in the event of:
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(i)
any breach of this Agreement by the Employer, including
specifically any breach by the Employer of the agreements contained in
Section 3(b),
Section 4,
Section 5,
or Section 6,
other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith that the Employer remedies promptly after receipt
of notice thereof given by the
Executive;
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(ii)
any reduction in the Executive’s base salary, percentage of base
salary available as incentive compensation or bonus opportunity or
benefits, in each case relative to those most favorable to the Executive
in effect at any time during the 180-day period prior to the Change in
Control of the Company or, to the extent more favorable to the Executive,
those in effect at any time during the Employment
Period;
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(iii)
the removal of the Executive from, or any failure to reelect or
reappoint the Executive to, any of the positions held with the Employer on
the date of the Change in Control of the Company or any other positions
with the Employer to which the Executive shall thereafter be elected,
appointed or assigned, except in the event that such removal or failure to
reelect or reappoint relates to the termination by the Employer of the
Executive’s employment for Cause or by reason of disability pursuant to
Section 12;
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(iv) a
good faith determination by the Executive that there has been a material
adverse change, without the Executive’s written consent, in the
Executive’s working conditions or status with the Employer relative to the
most favorable working conditions or status in effect during the 180-day
period prior to the Change in Control of the Company, or, to the extent
more favorable to the Executive, those in effect at any time during the
Employment Period, including but not limited to (A) a significant
change in the nature or scope of the Executive’s authority, powers,
functions, duties or responsibilities, or (B) a significant reduction
in the level of support services, staff, secretarial and other assistance,
office space and accoutrements, but in each case excluding for this
purpose an isolated, insubstantial and inadvertent event not occurring in
bad faith that the Employer remedies within ten (10) days after receipt of
notice thereof given by the
Executive;
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(v)
the relocation of the Executive’s principal place of employment to
a location more than 50 miles from the Executive’s principal place of
employment on the date 180 days prior to the Change in Control of the
Company;
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(vi)
the Employer requires the Executive to travel on Employer business
20% in excess of the average number of days per month the Executive was
required to travel during the 180-day period prior to the Change in
Control of the Company; or
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(vii)
failure by the Company to obtain the Agreement referred to in Section 17(a)
as provided therein.
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(n) Normal Retirement
Date. The term “Normal Retirement Date” means “Normal
Retirement Date” as defined in the primary qualified defined benefit pension
plan applicable to the Executive, or any successor plan, as in effect on the
date of the Change in Control of the Company.
(o) Person. The
term “Person” shall mean any individual, firm, partnership, corporation or other
entity, including any successor (by merger or otherwise) of such entity, or a
group of any of the foregoing acting in concert.
(p) Separation from
Service. For purposes of this Agreement, the term “Separation
from Service” means an Executive’s Termination of Employment, or if the
Executive continues to provide services following his or her Termination of
Employment, such later date as is considered a separation from service from the
Company and its 409A Affiliates within the meaning of Code Section
409A. Specifically, if Executive continues to provide services
to the Company or a 409A Affiliate in a capacity other than as an employee, such
shift in status is not automatically a Separation from Service.
(q) Termination of
Employment. For purposes of this Agreement, the Executive’s
termination of employment shall be presumed to occur when the Company and
Executive reasonably anticipate that no further services will be performed by
the Executive for the Company and its 409A Affiliates or that the level of bona
fide services the Executive will perform as an employee of the Company and its
409A Affiliates will permanently decrease to no more than 20% of the average
level of bona fide services performed by the Executive (whether as an employee
or independent contractor) for the Company and its 409A Affiliates over the
immediately preceding 36-month period (or such lesser period of
services). The Executive’s termination of employment shall be
presumed not to occur where the level of bona fide services performed by the
Executive for the Company and its 409A Affiliates continues at a level that is
50% or more of the average level of bona fide services performed by the
Executive (whether as an employee or independent contractor) for the Company and
its 409A Affiliates over the immediately preceding 36-month period (or such
lesser period of service). No presumption applies to a decrease in
services that is more than 20% but less than 50%, and in such event, whether the
Executive has had a Termination of Employment will be determined in good faith
by the Company based on the facts and circumstances in accordance with Code
Section 409A. Notwithstanding the foregoing, if Executive takes a
leave of absence for purposes of military leave, sick leave or other bona fide
leave of absence, the Executive will not be deemed to have incurred a Separation
from Service for the first 6 months of the leave of absence, or if longer, for
so long as the Executive’s right to reemployment is provided either by statute
or by contract, including this Agreement; provided that if the leave of
absence is due to a medically determinable physical or mental impairment that
can be expected to result in death or last for a continuous period of not less
than six months, where such impairment causes the Executive to be unable to
perform the duties of his or her position of employment or any substantially
similar position of employment, the leave may be extended for up to 29 months
without causing a Termination of Employment.
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(r) Termination
Date. Except as otherwise provided in Section 2(b),
Section 10(b),
and Section 17(a),
the term “Termination Date” means (i) if the Executive’s Termination of
Employment is by the Executive’s death, the date of death; (ii) if the
Executive’s Termination of Employment is by reason of voluntary early
retirement, as agreed in writing by the Employer and the Executive, the date of
such early retirement which is set forth in such written agreement;
(iii) if the Executive’s Termination of Employment for purposes of this
Agreement is by reason of disability pursuant to Section 12, the
earlier of thirty days after the Notice of Termination is given or one day prior
to the end of the Employment Period; (iv) if the Executive’s Termination of
Employment is by the Executive voluntarily (other than for Good Reason), the
date the Notice of Termination is given; and (v) if the Executive’s
Termination of Employment is by the Employer (other than by reason of disability
pursuant to Section 12) or
by the Executive for Good Reason, the earlier of thirty days after the Notice of
Termination is given or one day prior to the end of the Employment
Period. Notwithstanding the foregoing,
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(A) If
termination is for Cause pursuant to Section 1(f)(iii)
and if the Executive has cured the conduct constituting such Cause as
described by the Employer in its Notice of Termination within such
thirty-day or shorter period, then the Executive’s employment hereunder
shall continue as if the Employer had not delivered its Notice of
Termination.
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(B) If
the Executive shall in good faith give a Notice of Termination for Good
Reason and the Employer notifies the Executive that a dispute exists
concerning the termination within the fifteen-day period following receipt
thereof, then the Executive may elect to continue his or her employment
during such dispute and the Termination Date shall be determined under
this paragraph. If the Executive so elects and it is thereafter
determined that Good Reason did exist, the Termination Date shall be the
earliest of (1) the date on which the dispute is finally determined,
either (x) by mutual written agreement of the parties or (y) in
accordance with Section 22,
(2) the date of the Executive’s death or (3) one day prior to
the end of the Employment Period. If the Executive so elects
and it is thereafter determined that Good Reason did not exist, then the
employment of the Executive hereunder shall continue after such
determination as if the Executive had not delivered the Notice of
Termination asserting Good Reason and there shall be no Termination Date
arising out of such Notice. In either case, this Agreement
continues, until the Termination Date, if any, as if the Executive had not
delivered the Notice of Termination except that, if it is finally
determined that Good Reason did exist, the Executive shall in no case be
denied the benefits described in Section 9
(including a Termination Payment) based on events occurring after the
Executive delivered his Notice of
Termination.
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(C)
Except as provided in Section 1(n)(B),
if the party receiving the Notice of Termination notifies the other party
that a dispute exists concerning the termination within the appropriate
period following receipt thereof and it is finally determined that the
reason asserted in such Notice of Termination did not exist, then
(1) if such Notice was delivered by the Executive, the Executive will
be deemed to have voluntarily terminated his employment and the
Termination Date shall be the earlier of the date fifteen days after the
Notice of Termination is given or one day prior to the end of the
Employment Period and (2) if delivered by the Company, the Company
will be deemed to have terminated the Executive other than by reason of
death, disability or Cause.
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2. Termination or Cancellation
Prior to Change in Control.
(a) Subject
to Section 2(b),
the Employer and the Executive shall each retain the right to terminate the
employment of the Executive at any time prior to a Change in Control of the
Company. Subject to Section 2(b), in
the event the Executive’s employment is terminated prior to a Change in Control
of the Company, this Agreement shall be terminated and cancelled and of no
further force and effect, and any and all rights and obligations of the parties
hereunder shall cease.
(b) Anything
in this Agreement to the contrary notwithstanding, if a Change in Control of the
Company occurs and if the Executive’s employment with the Employer is terminated
(other than a termination due to the Executive’s death or as a result of the
Executive’s disability) during the period of 180 days prior to the date on
which the Change in Control of the Company occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was
at the request of a third party who has taken steps reasonably calculated to
effect a Change in Control of the Company or (ii) was by the Executive for
Good Reason or was by the Employer for other than Cause and otherwise arose in
connection with or in anticipation of a Change in Control of the Company, then
for all purposes of this Agreement such termination of employment shall be
deemed a “Covered Termination,” “Notice of Termination” shall be deemed to have
been given, and the “Employment Period” shall be deemed to have begun on the
date of such termination which shall be deemed to be the “Termination Date” and
the date of the Change of Control of the Company for purposes of this
Agreement.
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3. Employment Period; Vesting
of Certain Benefits.
(a) If a
Change in Control of the Company occurs when the Executive is employed by the
Employer, the Employer will continue thereafter to employ the Executive during
the Employment Period, and the Executive will remain in the employ of the
Employer in accordance with and subject to the terms and provisions of this
Agreement. Any Termination of Employment during the Employment
Period, whether by the Company or the Employer, shall be deemed a termination by
the Company for purposes of this Agreement.
(b) If a
Change in Control of the Company occurs when the Executive is employed by the
Employer, (i) the Company shall cause all restrictions on restricted stock
awards made to the Executive prior to the Change in Control of the Company to
lapse such that the Executive is fully and immediately vested in the Executive’s
restricted stock upon such a Change in Control of the Company; and (ii) the
Company shall cause all stock options granted to the Executive prior to the
Change in Control of the Company pursuant to the Company’s stock option plan(s)
to be fully and immediately vested upon such a Change in Control of the
Company.
4. Duties. During
the Employment Period, the Executive shall, in the same capacities and positions
held by the Executive at the time of the Change in Control of the Company or in
such other capacities and positions as may be agreed to by the Employer and the
Executive in writing, devote the Executive’s best efforts and all of the
Executive’s business time, attention and skill to the business and affairs of
the Employer, as such business and affairs now exist and as they may hereafter
be conducted.
5. Compensation. During
the Employment Period, the Executive shall be compensated as
follows:
(a) The
Executive shall receive, at reasonable intervals (but not less often than
monthly) and in accordance with such standard policies as may be in effect
immediately prior to the Change in Control of the Company, an annual base salary
in cash equivalent of not less than twelve times the Executive’s highest monthly
base salary for the twelve-month period immediately preceding the month in which
the Change in Control of the Company occurs or, if higher, an annual base salary
at the rate in effect immediately prior to the Change in Control of the Company
(determined prior to any reduction for amounts deferred under
Section 401(k) of the Code or otherwise, or deducted pursuant to a
cafeteria plan under Section 125 of the Code), subject to adjustment as
hereinafter provided in Section 6 (such
salary amount as adjusted upward from time to time is hereafter referred to as
the “Annual Base Salary”).
(b) The
Executive shall receive Fringe Benefits at least equal in value to the highest
value of such benefits provided for the Executive at any time during the 180-day
period immediately prior to the Change in Control of the Company or, if more
favorable to the Executive, those provided generally at any time during the
Employment Period to any executives of the Employer of comparable status and
position to the Executive; and shall be reimbursed, at such intervals and in
accordance with such standard policies that are most favorable to the Executive
that were in effect at any time during the 180-day period immediately prior to
the Change in Control of the Company, for any and all monies advanced in
connection with the Executive’s employment for reasonable and necessary expenses
incurred by the Executive on behalf of the Employer, including travel
expenses.
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(c) The
Executive and/or the Executive’s family, as the case may be, shall be included,
to the extent eligible thereunder (which eligibility shall not be conditioned on
the Executive’s salary grade or on any other requirement which excludes persons
of comparable status to the Executive unless such exclusion was in effect for
such plan or an equivalent plan at any time during the 180-day period
immediately prior to the Change in Control of the Company), in any and all plans
providing benefits for the Employer’s salaried employees in general, including
but not limited to group life insurance, hospitalization, medical (including
prescription drug coverage), dental, profit sharing and stock bonus plans; provided, that, (i) in no
event shall the aggregate level of benefits under such plans in which the
Executive is included be less than the aggregate level of benefits under plans
of the Employer of the type referred to in this Section 5(c) in
which the Executive was participating at any time during the 180-day period
immediately prior to the Change in Control of the Company and (ii) in no event
shall the aggregate level of benefits under such plans be less than the
aggregate level of benefits under plans of the type referred to in this Section 5(c)
provided at any time after the Change in Control of the Company to any executive
of the Employer of comparable status and position to the Executive.
(d) The
Executive shall annually be entitled to not less than the amount of paid
vacation and not fewer than the highest number of paid holidays to which the
Executive was entitled annually at any time during the 180-day period
immediately prior to the Change in Control of the Company or such greater amount
of paid vacation and number of paid holidays as may be made available annually
to other executives of the Employer of comparable status and position to the
Executive at any time during the Employment Period.
(e) The
Executive shall be included in all plans providing additional benefits to
executives of the Employer of comparable status and position to the Executive,
including but not limited to deferred compensation, split-dollar life insurance,
supplemental retirement, stock option, stock appreciation, stock bonus and
similar or comparable plans; provided, that, (i) in no
event shall the aggregate level of benefits under such plans be less than the
highest aggregate level of benefits under plans of the Employer of the type
referred to in this Section 5(e) in
which the Executive was participating at any time during the 180-day period
immediately prior to the Change in Control of the Company; (ii) in no event
shall the aggregate level of benefits under such plans be less than the
aggregate levels of benefits under plans of the type referred to in this Section 5(e)
provided at any time after the Change in Control of the Company to any executive
of the Employer comparable in status and position to the Executive; and (iii)
the Employer’s obligation to include the Executive in bonus or incentive
compensation plans shall be determined by Section 5(f).
(f) To assure
that the Executive will have an opportunity to earn incentive compensation after
a Change in Control of the Company, the Executive shall be included in a bonus
plan of the Employer which shall satisfy the standards described below (such
plan, the “Bonus Plan”). Bonuses under the Bonus Plan shall be
payable with respect to achieving such financial or other goals reasonably
related to the business of the Employer as the Employer shall establish (the
“Goals”), all of which Goals shall be attainable, prior to the end of the
Employment Period, with approximately the same degree of probability as the most
attainable goals under the Employer’s bonus plan or plans as in effect at any
time during the 180-day period immediately prior to the Change in Control of the
Company (whether one or more, the “Company Bonus Plan”) and in view of the
Employer’s existing and projected financial and business circumstances
applicable at the time. The amount of the bonus (the “Bonus Amount”)
that the Executive is eligible to earn under the Bonus Plan shall be no less
than the amount of the Executive’s maximum award provided in such Company Bonus
Plan (such bonus amount herein referred to as the “Targeted Bonus”), and in the
event the Goals are not achieved such that the entire Targeted Bonus is not
payable, the Bonus Plan shall provide for a payment of a Bonus Amount equal to a
portion of the Targeted Bonus reasonably related to that portion of the Goals
which were achieved. Payment of the Bonus Amount shall not be
affected by any circumstance occurring subsequent to the end of the Employment
Period, including termination of the Executive’s employment.
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6. Annual Compensation
Adjustments. During the Employment Period, the Board of
Directors of the Company (or an appropriate committee thereof) will consider and
appraise, at least annually, the contributions of the Executive to the Company,
and in accordance with the Company’s practice prior to the Change in Control of
the Company, due consideration shall be given to the upward adjustment of the
Executive’s Annual Base Salary, at least annually, (a) commensurate with
increases generally given to other executives of the Company of comparable
status and position to the Executive, and (b) as the scope of the Company’s
operations or the Executive’s duties expand.
7. Termination For Cause or
Without Good Reason. If there is a Covered Termination for
Cause or due to the Executive’s voluntarily terminating his or her employment
other than for Good Reason (any such terminations to be subject to the
procedures set forth in Section 13),
then the Executive shall be entitled to receive only Accrued Benefits.
8. Termination Giving Rise to a
Termination Payment. If there is a Covered Termination by the
Executive for Good Reason, or by the Company other than by reason of
(i) death, (ii) disability pursuant to Section 12, or
(iii) Cause (any such terminations to be subject to the procedures set
forth in Section 13),
then the Executive shall be entitled to receive, and the Company shall promptly
pay, Accrued Benefits and, in lieu of further base salary for periods following
the Termination Date, as liquidated damages and additional severance pay and in
consideration of the covenant of the Executive set forth in Section 14(a),
the Termination Payment pursuant to Section 9(a).
9. Payments Upon
Termination.
(a) Termination Payment.
The “Termination Payment” shall be an amount equal to the Annual Cash
Compensation times three (3). The Termination Payment shall be paid
to the Executive in cash equivalent on the first day of the seventh month
following the month in which the Executive’s Separation from Service occurs, and
the Termination Payment shall be accompanied by a payment of interest calculated
at the rate of interest announced by M&I Xxxxxxxx & Xxxxxx Bank
from time to time as its prime or base lending rate, such rate to be determined
on the Termination Date, compounded quarterly. Notwithstanding the
foregoing, in the event the Executive’s Termination Date is pursuant to Section
2(b), the Termination Payment shall be paid within ten (10) business days after
the date of the Change in Control of the Company (as defined without reference
to Section 2(b)), without interest. Such lump sum payment shall not
be reduced by any present value or similar factor, and the Executive shall not
be required to mitigate the amount of the Termination Payment by securing other
employment or otherwise, nor will such Termination Payment be reduced by reason
of the Executive securing other employment or for any other
reason. The Termination Payment shall be in lieu of, and acceptance
by the Executive of the Termination Payment shall constitute the Executive’s
release of any rights of the Executive to, any other cash severance payments
under any Company severance policy, practice or agreement.
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(b) Certain Additional Payments
by the Company.
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(i)
Notwithstanding any other provision of this Agreement, if any portion of
the Termination Payment or any other payment under this Agreement, or
under any other agreement with or plan of the Employer (in the aggregate,
“Total Payments”), would constitute an “excess parachute payment,” then
the Company shall pay the Executive an additional amount (the “Gross-Up
Payment”) such that the net amount retained by the Executive after
deduction of any excise tax imposed under Section 4999 of the Code
(or any successor provision) and any interest charges or penalties in
respect of the imposition of such excise tax (but not any federal, state
or local income tax, or employment tax) on the Total Payments, and any
federal, state and local income tax, employment tax, and excise tax upon
the payment provided for by thisSection 9(b)(i),
shall be equal to the Total Payments. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be
deemed to pay federal income tax and employment taxes at the highest
marginal rate of federal income and employment 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 domicile for income tax purposes on the date
the Gross-Up Payment is made, net of the maximum reduction in federal
income taxes that may be obtained from the deduction of such state and
local taxes.
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(ii)
For purposes of this Agreement, the terms “excess parachute payment” and
“parachute payments” shall have the meanings assigned to them in
Section 280G of the Code (or any successor provision) and such
“parachute payments” shall be valued as provided
therein. Present value for purposes of this Agreement shall be
calculated in accordance with Section 1274(b)(2) of the Code (or any
successor provision). Promptly following a Covered Termination
or notice by the Company to the Executive of its belief that there is a
payment or benefit due the Executive which will result in an “excess
parachute payment” as defined in Section 280G of the Code (or any
successor provision), the Executive and the Company, at the Company’s
expense, shall obtain the opinion (which need not be unqualified) of
nationally recognized tax counsel (“National Tax Counsel”) selected by the
Company’s independent auditors and reasonably acceptable to the Executive
(which may be regular outside counsel to the Company), which opinion sets
forth (A) the amount of the Base Period Income, (B) the amount and present
value of Total Payments, (C) the amount and present value of any excess
parachute payments, and (D) the amount of any Gross-Up
Payment. As used in this Agreement, the term “Base Period
Income” means an amount equal to the Executive’s “annualized includable
compensation for the base period” as defined in Section 280G(d)(1) of
the Code. For purposes of such opinion, the value of any
noncash benefits or any deferred payment or benefit shall be determined by
the Company’s independent auditors in accordance with the principles of
Section 280G(d)(3) and (4) of the Code (or any successor provisions),
which determination shall be evidenced in a certificate of such auditors
addressed to the Company and the Executive. The opinion of
National Tax Counsel shall be addressed to the Company and the Executive
and shall be binding upon the Company and the Executive. If
such National Tax Counsel so requests in connection with the opinion
required by thisSection 9(b),
the Executive and the Company shall obtain, at the Company’s expense, and
the National Tax Counsel may rely on, the advice of a firm of recognized
executive compensation consultants as to the reasonableness of any item of
compensation to be received by the Executive solely with respect to its
status under Section 280G of the Code and the regulations
thereunder. The Company shall pay Executive the Gross-Up
Payment, if any, at the same time as the Termination Payment is paid;
provided that if prior to such date the Executive is required to remit the
excise tax under Section 4999 of the Code to the Internal Revenue Service,
then upon written notice by the Executive to the Company, the Company
shall promptly pay the Gross-Up Payment (but based on Executive’s actual
rate of taxation) to the Executive.
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(iii)
In the event that upon any audit by the Internal Revenue Service, or by a
state or local taxing authority, of the Total Payments or Gross-Up
Payment, a change is finally determined to be required in the amount of
taxes paid by the Executive, appropriate adjustments shall be made under
this Agreement such that the net amount which is payable to the Executive
after taking into account the provisions of Section 4999 of the Code
(or any successor provision) shall reflect the intent of the parties as
expressed in thisSection 9,
in the manner determined by the National Tax Counsel. If the
Company is required to make a payment to the Executive, such payment shall
be paid following the date of the final determination by a court or the
Internal Revenue Service and within thirty (30) days after the date
Executive provides the Company a written request for reimbursement thereof
(accompanied by proof of taxes paid), but in no event shall the
reimbursement be made later than the end of the calendar year following
the year in which the Executive remits the excise tax to the Internal
Revenue Service.
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(iv)
The Company agrees to bear all costs associated with, and to indemnify and
hold harmless, the National Tax Counsel of and from any and all claims,
damages, and expenses resulting from or relating to its determinations
pursuant to thisSection 9(b),
except for claims, damages or expenses resulting from the gross negligence
or willful misconduct of such firm.
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(c) Additional
Benefits. If there is a Covered Termination and the Executive
is entitled to Accrued Benefits and the Termination Payment, then the Company
shall provide to the Executive the following additional benefits:
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(i)
The Executive shall receive until the end of the second calendar
year following the calendar year in which the Executive’s Separation from
Service occurs, at the expense of the Company, outplacement services, on
an individualized basis at a level of service commensurate with the
Executive’s status with the Company immediately prior to the date of the
Change in Control of the Company (or, if higher, immediately prior to the
Executive’s Termination of Employment), provided by a nationally
recognized executive placement firm selected by the Company; provided that the cost
to the Company of such services shall not exceed 10% of the Executive’s
Annual Base Salary.
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(ii)
Until the earlier of the end of the Employment Period or such time
as the Executive has obtained new employment and is covered by benefits
which in the aggregate are at least equal in value to the following
benefits, the Executive shall continue to be covered, at the expense of
the Company, by the same or equivalent life insurance, hospitalization,
medical and dental coverage as was required hereunder with respect to the
Executive immediately prior to the date the Notice of Termination is
given, subject to the following:
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(A) If
applicable, following the end of the COBRA continuation period, if such
hospitalization, medical or dental coverage is provided under a health
plan that is subject to Section 105(h) of the Code, benefits payable under
such health plan shall comply with the requirements of Treasury regulation
section 1.409A-3(i)(1)(iv)(A) and (B) and, if necessary, the Company shall
amend such health plan to comply
therewith.
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(B)
During the first six months following the Executive’s Separation
from Service, the Executive shall pay the Company for any life insurance
coverage that provides a benefit in excess of $50,000 under a group term
life insurance policy. After the end of such six month period,
the Company shall make a cash payment to the Executive equal to the
aggregate premiums paid by the Executive for such coverage, and thereafter
such coverage shall be provided at the expense of the Company for the
remainder of the period.
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If
the Executive is entitled to the Termination Payment pursuant to Section
2(b), within ten (10) days following the Change of Control, the Company
shall reimburse the Executive for any COBRA premiums the Executive paid
for his or her hospitalization, medical and dental coverage under COBRA
from the Executive’s Termination Date through the date of the Change of
Control.
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(iii)
The Company shall bear up to $15,000 in the aggregate of fees and
expenses of consultants and/or legal or accounting advisors engaged by the
Executive to advise the Executive as to matters relating to the
computation of benefits due and payable under this Section 9.
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(iv)
The Company shall cause the Executive to be fully and immediately
vested in his accrued benefit under any supplemental executive retirement
plan of the Employer providing benefits for the Executive (the “SERP”) and
in any nonqualified defined contribution retirement plan of the
Employer. In addition, the Company shall cause the Executive to
be deemed to have satisfied any minimum years of service requirement under
the SERP for subsidized early retirement benefits regardless of the
Executive’s age and service at the Termination Date; provided, however, that SERP
benefits will be based on service to date with no additional credit for
service or age beyond such Termination
Date.
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(v) On
the Termination Date, for purposes of determining Executive’s eligibility
for post-retirement benefits under any welfare benefit plan (as defined in
Section 3(1) of the Employee Retirement Security Act of 1974, as amended)
maintained by the Company immediately prior to the Change in Control of
the Company and in which Executive participated, immediately prior to the
Change in Control of the Company, Executive shall be credited with the
excess of three (3) years of participation in the applicable medical plan
and three (3) years of age over the actual years and fractional years of
participation and age credited to Executive as of the Change in Control of
the Company. If after taking into account such participation
and age, Executive would have been eligible to receive such
post-retirement benefits had Executive retired immediately prior to the
Change in Control of the Company, Executive shall receive, commencing on
the Termination Date, post-retirement benefits based on the terms and
conditions of the applicable plans in effect immediately prior to the
Change in Control of the Company. If applicable, following the
end of the COBRA continuation period, if such post-retirement welfare
benefits are provided under a health plan that is subject to Section
105(h) of the Code, benefits payable under such health plan shall comply
with the requirements of Treasury regulation section 1.409A-3(i)(1)(iv)(A)
and (B) and, if necessary, the Company shall amend such health plan to
comply therewith.
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(vi)
At the same time as the Termination Payment is made, the Company
shall pay the Executive an amount equal to the value of the retirement
benefits under the various retirement benefits plans of the Company (both
qualified and non-qualified) that the Executive is participating in as of
the Termination Date, and that would have accrued had Executive been an
active employee receiving his Annual Base Salary under such plans for an
additional period of three (3) years following the Termination
Date. For purposes of calculating this payment for any defined
benefit pension plan (whether qualified or nonqualified), if any, the
value shall be determined as a single sum present value, calculated
assuming that the benefits commence on the earliest date following
termination on which the Executive would be eligible to commence benefits
under the such plan(s), and the actuarial factors used shall be the
factors utilized in the qualified defined benefit pension plan to
determine lump sum payments as of the Termination Date. For
purposes of calculating this payment for any defined contribution plan
(whether qualified or nonqualified), if any, the value shall be determined
as a single sum amount equal to the employer non-matching and non-elective
deferral contributions that would have been made for the Executive,
assuming that the contribution formulas are the same as in effect on the
Termination Date, but determined without regard to any interest such
amounts would have earned.
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(vii)
The Company shall cause all performance plan awards granted to the
Executive pursuant to any long-term incentive plan maintained by the
Company to be paid out at target, as if all performance requirements had
been satisfied, on a pro rata basis based on the completed portion of each
award cycle, reduced, but not below zero, by the amount payable as an
Accrued Benefit pursuant to Section 1(b)(iv)(B) to the extent
such Accrued Benefit amount relates to the same performance plan award(s)
and the same period of time as are described in this clause
(vii).
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(viii)
The Executive shall, after the Termination Date, retain all rights
to indemnification under applicable law or under the Company’s Certificate
of Incorporation or By-Laws, as they may be amended or restated from time
to time, to the extent any such amendment or restatement expands the
Executive’s rights to indemnification. In addition, the Company
shall maintain Director’s and Officer’s liability insurance on behalf of
the Executive, provided the Executive is eligible to be covered and has in
fact been covered by such insurance, at the highest level in effect
immediately prior to the date of the Change in Control of the Company (or,
if higher, immediately prior to the termination of the Executive’s
employment) including any such insurance that was reduced prior to a
Change in Control of the Company at the request of the person or entity
acquiring control of the Company or reasonably shown to be related to the
Change in Control of the Company, for the seven (7) year period following
the Termination Date.
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10. Death.
(a) Except as
provided in Section 10(b),
in the event of a Covered Termination due to the Executive’s death, the
Executive’s estate, heirs and beneficiaries shall receive all the Executive’s
Accrued Benefits through the Termination Date.
(b) In the
event the Executive dies after a Notice of Termination is given (i) by the
Company or (ii) by the Executive for Good Reason, the Executive’s estate,
heirs and beneficiaries shall be entitled to the benefits described in Section 10(a)
and, subject to the provisions of this Agreement, to such Termination Payment
(and the additional benefits described in Section 9(c)) as the
Executive would have been entitled to had the Executive lived, except that the
Termination Payment shall be paid within ninety (90) days following the date of
the Executive’s death, without interest thereon. For purposes of this
Section 10(b),
the Termination Date shall be the earlier of thirty days following the giving of
the Notice of Termination, subject to extension pursuant to Section 1(n), or
one day prior to the end of the Employment Period.
11. Retirement. If,
during the Employment Period, the Executive and the Employer shall execute an
agreement providing for the early retirement of the Executive from the Employer,
or the Executive shall otherwise give notice that he is voluntarily choosing to
retire early from the Employer, the Executive shall receive Accrued Benefits
through the Termination Date; provided, that if the
Executive’s employment is terminated by the Executive for Good Reason or by the
Company other than by reason of death, disability or Cause and the Executive
also, in connection with such termination, elects voluntary early retirement,
the Executive shall also be entitled to receive a Termination Payment pursuant
to Section 8.
12. Termination for
Disability. If, during the Employment Period, as a result of
the Executive’s disability due to physical or mental illness or injury
(regardless of whether such illness or injury is job-related), the Executive
shall have been absent from the Executive’s duties hereunder on a full-time
basis for a period of six consecutive months and, within thirty days after the
Company notifies the Executive in writing that it intends to terminate the
Executive’s employment (which notice shall not constitute the Notice of
Termination contemplated below), the Executive shall not have returned to the
performance of the Executive’s duties hereunder on a full-time basis, the
Company may terminate the Executive’s employment for purposes of this Agreement
pursuant to a Notice of Termination given in accordance with Section 13. If
the Executive’s employment is terminated on account of the Executive’s
disability in accordance with this Section, the Executive shall receive Accrued
Benefits through the Termination Date and shall remain eligible for all benefits
provided by any long term disability programs of the Company in effect at the
time of such termination.
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13. Termination Notice and
Procedure. Any Covered Termination by the Company or the
Executive (other than a termination of the Executive’s employment that is a
Covered Termination by virtue of Section 2(b))
shall be communicated by a written notice of termination (“Notice of
Termination”) to the Executive, if such Notice is given by the Company, and to
the Company, if such Notice is given by the Executive, all in accordance with
the following procedures and those set forth in Section 23:
(a) If such
termination is for disability, Cause or Good Reason, the Notice of Termination
shall indicate in reasonable detail the facts and circumstances alleged to
provide a basis for such termination.
(b) Any
Notice of Termination by the Company shall have been approved, prior to the
giving thereof to the Executive, by a resolution duly adopted by a majority of
the directors of the Company (or any successor corporation) then in
office.
(c) If the
Notice is given by the Executive for Good Reason, the Executive may cease
performing his duties hereunder on or after the date fifteen days after the
delivery of Notice of Termination and shall in any event cease employment on the
Termination Date. If the Notice is given by the Company, then the
Executive may cease performing his duties hereunder on the date of receipt of
the Notice of Termination, subject to the Executive’s rights
hereunder.
(d) The
Executive shall have thirty days, or such longer period as the Company may
determine to be appropriate, to cure any conduct or act, if curable, alleged to
provide grounds for termination of the Executive’s employment for Cause under
this Agreement pursuant to Section 1(f)(iii).
(e) The
recipient of any Notice of Termination shall personally deliver or mail in
accordance with Section 23
written notice of any dispute relating to such Notice of Termination to the
party giving such Notice within fifteen days after receipt thereof; provided, however, that if
the Executive’s conduct or act alleged to provide grounds for termination by the
Company for Cause is curable, then such period shall be thirty
days. After the expiration of such period, the contents of the Notice
of Termination shall become final and not subject to dispute.
14. Further Obligations of the
Executive.
(a) Competition. The
Executive agrees that, in the event of any Covered Termination where the
Executive is entitled to Accrued Benefits and the Termination Payment, the
Executive shall not, for a period expiring one year after the Termination Date,
without the prior written approval of the Company’s Board of Directors,
participate in the management of, be employed by or own any business enterprise
at a location within the United States that engages in substantial competition
with the Company or its subsidiaries, where such enterprise’s revenues from any
competitive activities amount to 10% or more of such enterprise’s net revenues
and sales for its most recently completed fiscal year; provided, however, that
nothing in this Section 14(a)
shall prohibit the Executive from owning stock or other securities of a
competitor amounting to less than five percent of the outstanding capital stock
of such competitor.
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(b) Confidentiality. During
and following the Executive’s employment by the Company, the Executive shall
hold in confidence and not directly or indirectly disclose or use or copy or
make lists of any confidential information or proprietary data of the Company
(including that of the Employer), except to the extent authorized in writing by
the Board of Directors of the Company or required by any court or administrative
agency, other than to an employee of the Company or a person to whom disclosure
is reasonably necessary or appropriate in connection with the performance by the
Executive of duties as an executive of the Company. Confidential
information shall not include any information known generally to the public or
any information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that of the
Company. All records, files, documents and materials, or copies
thereof, relating to the business of the Company which the Executive shall
prepare, or use, or come into contact with, shall be and remain the sole
property of the Company and shall be promptly returned to the Company upon
termination of employment with the Company.
15. Expenses and
Interest. If, after a Change in Control of the Company,
(a) a dispute arises with respect to the enforcement of the Executive’s
rights under this Agreement or (b) any legal or arbitration proceeding
shall be brought to enforce or interpret any provision contained herein or to
recover damages for breach hereof, in either case so long as the Executive is
not acting in bad faith, then the Company shall reimburse the Executive for any
reasonable attorneys’ fees and necessary costs and disbursements incurred as a
result of the dispute, legal or arbitration proceeding (“Expenses”), and
prejudgment interest on any money judgment or arbitration award obtained by the
Executive calculated at the rate of interest announced by M&I Xxxxxxxx
& Xxxxxx Bank from time to time at its prime or base lending rate from the
date that payments to him or her should have been made under this
Agreement. Within ten days after the Executive’s written request
therefor (but in no event later than the end of the calendar year following the
calendar year in which such Expense is incurred), the Company shall reimburse
the Executive, or such other person or entity as the Executive may designate in
writing to the Company, the Executive’s reasonable Expenses.
16. Payment Obligations
Absolute. The Company’s obligation during and after the
Employment Period to pay the Executive the amounts and to make the benefit and
other arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any setoff,
counterclaim, recoupment, defense or other right which the Company may have
against him or anyone else, except as provided in Section
20. Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, and compensation earned from such employment or
otherwise shall not reduce the amounts otherwise payable under this
Agreement. Except as provided in Section 9(b) and
Section 15, all
amounts payable by the Company hereunder shall be paid without notice or demand.
Each and every payment made hereunder by the Company shall be final, and the
Company will not seek to recover all or any part of such payment from the
Executive, or from whomsoever may be entitled thereto, for any reason
whatsoever.
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17. Successors.
(a) If the
Company sells, assigns or transfers all or substantially all of its business and
assets to any Person or if the Company merges into or consolidates or otherwise
combines (where the Company does not survive such combination) with any Person
(any such event, a “Sale of Business”), then the Company shall assign all of its
right, title and interest in this Agreement as of the date of such event to such
Person, and the Company shall cause such Person, by written agreement in form
and substance reasonably satisfactory to the Executive, to expressly assume and
agree to perform from and after the date of such assignment all of the terms,
conditions and provisions imposed by this Agreement upon the
Company. Failure of the Company to obtain such agreement prior to the
effective date of such Sale of Business shall be a breach of this Agreement
constituting “Good Reason” hereunder, except that for purposes of implementing
the foregoing the date upon which such Sale of Business becomes effective shall
be deemed the Termination Date. In case of such assignment by the
Company and of assumption and agreement by such Person, as used in this
Agreement, “Company” shall thereafter mean such Person which executes and
delivers the agreement provided for in this Section 17 or
which otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law, and this Agreement shall inure to the benefit of, and be
enforceable by, such Person. The Executive shall, in his or her
discretion, be entitled to proceed against any or all of such Persons, any
Person which theretofore was such a successor to the Company and the Company (as
so defined) in any action to enforce any rights of the Executive
hereunder. Except as provided in this Section 17(a),
this Agreement shall not be assignable by the Company. This Agreement
shall not be terminated by the voluntary or involuntary dissolution of the
Company.
(b) This
Agreement and all rights of the Executive shall inure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors,
administrators, heirs and beneficiaries. All amounts payable to the
Executive under Sections 7, 8, 9, 10,
11, 12 and 15 if the Executive had lived shall be paid, in the event of
the Executive’s death, to the Executive’s estate, heirs and representatives;
provided, however, that
the foregoing shall not be construed to modify any terms of any benefit plan of
the Employer, as such terms are in effect on the date of the Change in Control
of the Company, that expressly govern benefits under such plan in the event of
the Executive’s death.
18. Severability. The
provisions of this Agreement shall be regarded as divisible, and if any of said
provisions or any part hereof are declared invalid or unenforceable by a court
of competent jurisdiction, the validity and enforceability of the remainder of
such provisions or parts hereof and the applicability thereof shall not be
affected thereby.
19. Contents of Agreement;
Waiver of Rights; Amendment. This Agreement sets forth the
entire understanding between the parties hereto with respect to the subject
matter hereof and supercedes, and the Executive hereby waives all rights under,
any prior or other agreement or understanding between the parties with respect
to such subject matter. This Agreement may not be amended or modified
at any time except by written instrument executed by the Company and the
Executive.
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20. Withholding. The
Company shall be entitled to withhold from amounts to be paid to the Executive
hereunder any federal, state or local withholding or other taxes or charges
which it is from time to time required to withhold; provided, that the amount so
withheld shall not exceed the minimum amount required to be withheld by
law. The Company shall be entitled to rely on an opinion of the
National Tax Counsel if any question as to the amount or requirement of any such
withholding shall arise.
21. Certain Rules of
Construction. No party shall be considered as being
responsible for the drafting of this Agreement for the purpose of applying any
rule construing ambiguities against the drafter or otherwise. No
draft of this Agreement shall be taken into account in construing this
Agreement. Any provision of this Agreement which requires an
agreement in writing shall be deemed to require that the writing in question be
signed by the Executive and an authorized representative of the
Company.
22. Governing Law; Resolution of
Disputes. This Agreement and the rights and obligations
hereunder shall be governed by and construed in accordance with the laws of the
State of Wisconsin. Any dispute arising out of this Agreement shall,
at the Executive’s election, be determined by arbitration under the rules of the
American Arbitration Association then in effect (in which case both parties
shall be bound by the arbitration award) or by litigation. Whether
the dispute is to be settled by arbitration or litigation, the venue for the
arbitration or litigation shall be Milwaukee, Wisconsin or, at the Executive’s
election, if the Executive is not then residing or working in the Milwaukee,
Wisconsin metropolitan area, in the judicial district encompassing the city in
which the Executive resides; provided, that, if the
Executive is not then residing in the United States, the election of the
Executive with respect to such venue shall be either Milwaukee, Wisconsin or in
the judicial district encompassing that city in the United States among the
thirty cities having the largest population (as determined by the most recent
United States Census data available at the Termination Date) which is closest to
the Executive’s residence. The parties consent to personal
jurisdiction in each trial court in the selected venue having subject matter
jurisdiction notwithstanding their residence or situs, and each party
irrevocably consents to service of process in the manner provided hereunder for
the giving of notices.
23. Notice. Notices
given pursuant to this Agreement shall be in writing and, except as otherwise
provided by Section 13(d),
shall be deemed given when actually received by the Executive or actually
received by the Company’s Secretary or any officer of the Company other than the
Executive. If mailed, such notices shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid, if to the Company, to Regal-Beloit Corporation, Attention: Secretary
(or President, if the Executive is then Secretary), 000 Xxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxx 00000-0000, or if to the Executive, at the address set forth below the
Executive’s signature to this Agreement, or to such other address as the party
to be notified shall have theretofore given to the other party in
writing.
24. Withholding. The
Company shall be entitled to withhold from amounts to be paid to the Executive
hereunder any federal, state or local withholding or other taxes or charges
which it is from time to time required to withhold; provided that the amount so
withheld shall not exceed the minimum amount required to be withheld by
law. In addition, if prior to the date of payment of the Termination
Payment hereunder, the Federal Insurance Contributions Act (FICA) tax imposed
under Sections 3101, 3121(a) and 3121(v)(2), where applicable, becomes due with
respect to any payment or benefit to be provided hereunder, the Company may
provide for an immediate payment of the amount needed to pay the Executive’s
portion of such tax (plus an amount equal to the taxes that will be due on such
amount) and the Executive’s Termination Payment shall be reduced
accordingly. The Company shall be entitled to rely on an opinion of
the National Tax Counsel if any question as to the amount or requirement of any
such withholding shall arise.
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25. Additional Section 409A
Provisions. (a) If any payment amount or the value
of any benefit under this Agreement is required to be included in an Executive’s
income prior to the date such amount is actually paid or the benefit provided as
a result of the failure of this Agreement (or any other arrangement that is
required to be aggregated with this Agreement under Code Section 409A) to comply
with Code Section 409A, then the Executive shall receive a distribution, in a
lump sum, within 90 days after the date it is finally determined that the
Agreement (or such other arrangement that is required to be aggregated with this
Agreement) fails to meet the requirements of Section 409A of the Code; such
distribution shall equal the amount required to be included in the Executives
income as a result of such failure and shall reduce the amount of payments or
benefits otherwise due hereunder.
(b) The
Company and the Executive intend the terms of this Agreement to be in compliance
with Section 409A of the Code. The Company does not guarantee the tax
treatment or tax consequences associated with any payment or benefit, including
but not limited to consequences related to Section 409A of the
Code. To the maximum extent permissible, any ambiguous terms of this
Agreement shall be interpreted in a manner which avoids a violation of Section
409A of the Code.
(c) The
Executive acknowledges that to avoid an additional tax on payments that may be
payable or benefits that may be provided under this Agreement and that
constitute deferred compensation that is not exempt from Section 409A of the
Code, the Executive must make a reasonable, good faith effort to collect any
payment or benefit to which the Executive believes the Executive is entitled
hereunder no later than 90 days after the latest date upon which the payment
could have been made or benefit provided under this Agreement, and if not paid
or provided, must take further enforcement measures within 180 days after such
latest date.
26. No
Waiver. No waiver by either party at any time of any breach by
the other party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
27. Headings. The
headings herein contained are for reference only and shall not affect the
meaning or interpretation of any provision of this Agreement.
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and year
first above written.
| REGAL-BELOIT CORPORATION | |||
| By:___________________________________ | |||
| Name: | |||
| Title: | |||
| Attest:________________________________ | |||
| EXECUTIVE: | |||
| ________________________________ (SEAL) | |||
| Name: | |||
| Address: | |||
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