EXHIBIT 10.12(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of March 1, 2002 by and
between Household International, Inc., a Delaware corporation, (hereinafter
called the "Corporation") and Xxxxxxx X. Xxxxxxxx (hereinafter called the
"Executive").
WITNESSETH THAT:
WHEREAS, the Executive is currently employed by the Corporation under
an employment agreement dated January 1, 1999; and
WHEREAS, the Corporation desires to continue to employ the Executive as
its Chairman and Chief Executive Officer, and the Executive desires to continue
in such employment, on amended and restated terms and conditions;
NOW, THEREFORE, the Corporation and the Executive, each intending to be
legally bound, hereby mutually covenant and agree as follows:
1. Employment and Term.
(a) Employment. The Corporation shall continue to employ the
Executive as the Chairman and Chief Executive Officer of the Corporation, and
the Executive shall so serve, for the term set forth in Paragraph 1(b).
(b) Term. The initial term of the Executive's employment under
this Agreement shall commence as of March 1, 2002 (the "Effective Date") and end
on August 31, 2003, subject to the extension of such term as hereinafter
provided and subject to earlier termination as provided in Paragraph 7, below.
Beginning on March 1, 2002, the term of this Agreement shall be extended
automatically for one (1) additional day for each day which has then elapsed
since March 1, 2002, unless, at any time after March 1, 2002, either the Board
of Directors of the Corporation (the "Board"), on behalf of the Corporation, or
the Executive gives written notice to the other that such automatic extension of
the term of this Agreement shall cease. Any such notice shall be effective
immediately upon delivery. The initial term of this Agreement, plus any
extension by operation of this Paragraph 1, shall be hereinafter referred to as
the "Term."
2. Duties. During the period of employment as provided in
Paragraph 1(b) hereof, the Executive shall serve as Chairman and Chief Executive
Officer of the Corporation and have all powers and duties consistent with such
position, subject to the reasonable direction of the Board. The Executive shall
also continue to serve as a member of the Board if elected as such. The
Executive shall devote substantially his entire time during reasonable business
hours (reasonable sick leave and vacations excepted) and best efforts to fulfill
faithfully, responsibly and to the best of his ability his duties hereunder.
However, the
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Executive may, with the approval of the Board, which shall not be withheld
unreasonably, serve on corporate, civic and/or charitable boards and committees.
3. Salary.
(a) Base Salary. For services performed by the Executive for
the Corporation pursuant to this Agreement during the period of employment as
provided in Paragraph 1(b) hereof, the Corporation shall pay the Executive a
base salary of $1,000,000 per year, payable in substantially equal installments
in accordance with the Corporation's regular payroll practices. The Executive's
base salary (with any increases under paragraph (b), below) shall not be subject
to reduction. Any compensation which may be paid to the Executive under any
additional compensation or incentive plan of the Corporation or which may be
otherwise authorized from time to time by the Board (or an appropriate committee
thereof) shall be in addition to the base salary to which the Executive shall be
entitled under this Agreement.
(b) Salary Increases. During the period of employment as
provided in Paragraph 1(b) hereof, the base salary of the Executive shall be
reviewed no less frequently than annually by the Board or the Compensation
Committee of the Board to determine whether or not the same should be increased
in light of the duties and responsibilities of the Executive and the performance
thereof, and if it is determined that an increase is merited, such increase
shall be promptly put into effect and the base salary of the Executive as so
increased shall constitute the base salary of the Executive for purposes of
Paragraph 3(a).
4. Annual Bonuses. For each calendar year during the term of
employment, the Executive shall be eligible to receive in cash an annual
performance bonus based upon the terms of the Corporation's bonus plan from time
to time for senior executives, as adopted by the Board and administered by the
Compensation Committee.
5. Equity Incentive Compensation. During the term of employment
hereunder the Executive shall be eligible to participate, in the manner and to
the extent approved by the Board or the Compensation Committee, in any
equity-based incentive compensation plan or program approved by the Board from
time to time, including (but not by way of limitation) any plan providing for
the granting of (a) options to purchase stock of the Corporation, (b) restricted
stock of the Corporation or (c) similar equity-based units or interests, with
awards to the Executive that are of appropriate size and nature relative to
those for other senior executives and the individual performance of the
Executive.
6. Other Benefits. In addition to the compensation described in
Paragraphs 3, 4 and 5, above, the Executive shall also be entitled to
participate in all of the various retirement, welfare, fringe benefit, executive
perquisite, and expense reimbursement plans, programs and arrangements of the
Corporation to the extent the Executive is eligible for participation under the
terms of such plans, programs and arrangements, with benefit levels and terms of
participation at least as favorable to the Executive as those in effect on the
Effective Date, except that the Executive's benefits and/or perquisites may be
reduced in
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connection with similar reductions uniformly applied with respect to all
similarly situated employees provided, however, that the Executive's overall
benefits shall be no less favorable than those for any other executive of the
Corporation.
7. Termination. Unless earlier terminated in accordance with the
following provisions of this Paragraph 7, the Corporation shall continue to
employ the Executive and the Executive shall remain employed by the Corporation
during the entire term of this Agreement as set forth in Paragraph 1(b).
Paragraph 9 hereof sets forth certain obligations of the Corporation in the
event that the Executive's employment hereunder is terminated. Certain
capitalized terms used in this Paragraph 7 and in Paragraphs 8 and 9 hereof are
defined in Paragraph 7(d), below.
(a) Death or Disability. Except to the extent otherwise
provided in Paragraph 9 with respect to certain post-Date of Termination payment
obligations of the Corporation, this Agreement shall terminate immediately as of
the Date of Termination in the event of the Executive's death or in the event
that the Executive becomes disabled. The Executive will be deemed to be disabled
upon the earlier of (i) the end of a six (6)-consecutive month period during
which, by reason of physical or mental injury or disease, the Executive has been
unable to perform substantially all of his usual and customary duties under this
Agreement or (ii) the date that a reputable physician selected by the Board, and
as to whom the Executive has no reasonable objection, determines in writing that
the Executive will, by reason of physical or mental injury or disease, be unable
to perform substantially all of the Executive's usual and customary duties under
this Agreement for a period of at least six (6) consecutive months. If any
question arises as to whether the Executive is disabled, upon reasonable request
therefor by the Board, the Executive shall submit to reasonable medical
examination for the purpose of determining the existence, nature and extent of
any such disability. The Board shall promptly give the Executive written notice
of any such determination of the Executive's disability and of any decision of
the Board to terminate the Executive's employment by reason thereof. Until the
Date of Termination for disability, the base salary payable to the Executive
under Paragraph 3 hereof shall be reduced dollar-for-dollar by the amount of any
disability benefits paid to the Executive in accordance with any disability
policy or program of the Corporation.
(b) Discharge for Cause. In accordance with the procedures
hereinafter set forth, the Board may discharge the Executive from his employment
hereunder for Cause. Except to the extent otherwise provided in Paragraph 9 with
respect to certain post-Date of Termination obligations of the Corporation, this
Agreement shall terminate immediately as of the Date of Termination in the event
the Executive is discharged for Cause. Any discharge of the Executive for Cause
shall be communicated by a Notice of Termination to the Executive given in
accordance with Paragraph 17 of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) specifies the termination date, which may be as early as the date of the
giving of such notice. In the case of a discharge of the Executive for
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Cause, the Notice of Termination shall include a copy of a resolution duly
adopted by the Board at a meeting called and held for such purpose (after
reasonable notice to the Executive and reasonable opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board prior to
such vote), finding that, in the reasonable and good faith opinion of the Board,
the Executive was guilty of conduct constituting Cause. No purported termination
of the Executive's employment for Cause shall be effective without a Notice of
Termination.
(c) Termination for Other Reasons. The Corporation may
discharge the Executive without Cause by giving written notice to the Executive
in accordance with Paragraph 17 at least fifteen (15) days prior to the Date of
Termination. The Executive may resign from his employment, without liability to
the Corporation, by giving written notice to the Corporation in accordance with
Paragraph 17 at least fifteen (15) days prior to the Date of Termination. Except
to the extent otherwise provided in Paragraph 9 with respect to certain
post-Date of Termination obligations of the Corporation, this Agreement shall
terminate immediately as of the Date of Termination in the event the Executive
is discharged without Cause or resigns.
(d) Definitions. For purposes of this Agreement, the following
capitalized terms shall have the meanings set forth below:
(i) "Accrued Obligations" shall mean, as of the Date
of Termination, the sum of (A) the Executive's base salary under Paragraph 3
through the Date of Termination to the extent not theretofore paid, (B) the
amount of any bonus, incentive compensation, deferred compensation and other
cash compensation accrued by the Executive as of the Date of Termination to the
extent not theretofore paid and (C) any vacation pay, expense reimbursements and
other cash entitlements accrued by the Executive as of the Date of Termination
to the extent not theretofore paid. For the purpose of this Paragraph 7(d)(i),
amounts shall be deemed to accrue ratably over the period during which they are
earned, but no discretionary compensation shall be deemed earned or accrued
until it is specifically approved by the Board or the Compensation Committee in
accordance with the applicable plan, program or policy.
(ii) "Cause" shall mean: (A) the Executive's
commission of an act materially and demonstrably detrimental to the financial
condition and/or goodwill of the Corporation or any of its subsidiaries, which
act constitutes gross negligence or willful misconduct by the Executive in the
performance of his material duties to the Corporation or any of its
subsidiaries, or (B) the Executive's commission of any material act of
dishonesty or breach of trust resulting or intended to result in material
personal gain or enrichment of the Executive at the expense of the Corporation
or any of its subsidiaries, or (C) the Executive's conviction of a felony
involving moral turpitude, but specifically excluding any conviction based
entirely on vicarious liability. No act or failure to act will be considered
"willful" unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that his action or omission was in the best
interests of the Corporation. In addition, no act or omission will constitute
Cause unless (A) a resolution finding that Cause exists has
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been approved by a majority of all of the members of the Board at a meeting at
which the Executive is allowed to appear with his legal counsel and (B) the
Corporation has given detailed written notice thereof to the Executive and,
where remedial action is feasible, he then fails to remedy the act or omission
within a reasonable time after receiving such notice.
(iii) A "Change in Control" shall be deemed to have
occurred if:
(A) Any "person" (as defined in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
excluding for this purpose the Corporation or any subsidiary of the Corporation,
or any employee benefit plan of the Corporation or any subsidiary of the
Corporation, or any person or entity organized, appointed or established by the
Corporation for or pursuant to the terms of such plan which acquires beneficial
ownership of voting securities of the Corporation, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly
of securities of the Corporation representing twenty percent (20%) or more of
the combined voting power of the Corporation's then outstanding securities;
provided, however, that no Change in Control shall be deemed to have occurred as
the result of an acquisition of securities of the Corporation by the Corporation
which, by reducing the number of voting securities outstanding, increases the
direct or indirect beneficial ownership interest of any person to twenty percent
(20%) or more of the combined voting power of the Corporation's then outstanding
securities, but any subsequent increase in the direct or indirect beneficial
ownership interest of such a person in the Corporation shall be deemed a Change
in Control; and provided further that if the Board of Directors of the
Corporation determines in good faith that a person who has become the beneficial
owner directly or indirectly of securities of the Corporation representing
twenty percent (20%) or more of the combined voting power of the Corporation's
then outstanding securities has inadvertently reached that level of ownership
interest, and if such person divests as promptly as practicable a sufficient
amount of securities of the Corporation so that the person no longer has a
direct or indirect beneficial ownership interest in twenty percent (20%) or more
of the combined voting power of the Corporation's then outstanding securities,
then no Change in Control shall be deemed to have occurred;
(B) During any period of two (2) consecutive years
(not including any period prior to the Effective Date of this Agreement),
individuals who at the beginning of such two-year period constitute the Board of
Directors of the Corporation and any new director or directors (except for any
director designated by a person who has entered into an agreement with the
Corporation to effect a transaction described in subparagraph (A), above, or
subparagraph (C), below) whose election by the Board or nomination for election
by the Corporation's shareholders was approved by a vote of at least two-thirds
of the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of the Board
(such individuals and any such new directors being referred to as the "Incumbent
Board"); or
(C) Consummation of (1) an agreement for the sale or
disposition of the Corporation or all or substantially all of the Corporation's
assets, (2) a plan of merger or
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consolidation of the Corporation with any other corporation, or (3) a similar
transaction or series of transactions involving the Corporation (any transaction
described in parts (1) through (3) of this subparagraph (C) being referred to as
a "Business Combination"), in each case unless after such a Business Combination
(x) the shareholders of the Corporation immediately prior to the Business
Combination continue to own, directly or indirectly, more than sixty percent
(60%) of the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the new (or
continued) entity (including, but not by way of limitation, an entity which as a
result of such transaction owns the Corporation or all or substantially all of
the Corporation's former assets either directly or through one or more
subsidiaries) immediately after such Business Combination, in substantially the
same proportion as their ownership of the Corporation immediately prior to such
Business Combination, (y) no person (excluding any entity resulting from such
Business Combination or any employee benefit plan (or related trust) of the
Corporation or of such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, twenty percent (20%) or more of the
then combined voting power of the then outstanding voting securities of such
entity, except to the extent that such ownership existed prior to the Business
Combination, and (z) at least a majority of the members of the board of
directors of the entity resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination; or
(D) Approval by the shareholders of the Corporation
of a complete liquidation or dissolution of the Corporation.
Any other provision of this Agreement to the contrary
notwithstanding, a "Change in Control" shall not include any transaction
described in subparagraph (A) or (C), above, where, in connection with such
transaction, the Executive and/or any party acting in concert with the Executive
substantially increases his or its, as the case may be, ownership interest in
the Corporation or a successor to the Corporation (other than through conversion
of prior ownership interests in the Corporation and/or through equity awards
received entirely as compensation for past or future personal services).
(iv) "Date of Termination" shall mean (A) in the
event of a discharge of the Executive by the Board for Cause, the date specified
in such Notice of Termination, (B) in the event of a discharge of the Executive
without Cause or a resignation by the Executive, the date specified in the
written notice to the Executive (in the case of discharge) or the Corporation
(in the case of resignation), which date shall be no less than fifteen (15) days
from the date of such written notice, (C) in the event of the Executive's death,
the date of the Executive's death, and (D) in the event of termination of the
Executive's employment by reason of disability pursuant to Paragraph 7(a), the
date the Executive receives written notice of such termination.
(v) "Good Reason" shall mean any of the following
without the consent of the Executive: (A) the failure to re-elect the Executive
as Chairman and Chief Executive Officer, (B) assignment of duties inconsistent
with the Executive's position,
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authority, duties or responsibilities, or any other action by the Corporation
which results in a substantial diminution of such position, authority, duties or
responsibilities, other than an isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by the Corporation promptly after
receipt of notice thereof given by the Executive, (C) any failure by the
Corporation to comply with any of the provisions of this Agreement, including
(but not by way of limitation) those provisions regarding compensation and
benefits, other than an isolated, insubstantial and inadvertent action not taken
in bad faith and which is remedied by the Corporation promptly after receipt of
notice thereof given by the Executive, or (D) the Corporation giving notice to
the Executive to stop further operation of the evergreen feature described in
Paragraph 1(b), above. However, during the period of three (3) years after a
Change in Control, "Good Reason" shall also include the Executive being
reassigned, without the Executive's consent, to an office location outside of
the Chicago, Illinois metropolitan area. In addition, termination by the
Executive for any reason during the thirty-six (36)-month period beginning with
a Change in Control shall be deemed to be a termination for Good Reason;
provided, however, that if the Executive dies after a Change in Control but less
than twelve (12) months after a Change in Control, the Executive will be deemed
to have terminated employment for Good Reason twelve (12) months after the
Change in Control.
(vi) "Qualifying Termination" shall mean termination
of the Executive's employment under this Agreement (A) by reason of the
discharge of the Executive by the Corporation other than for Cause or disability
or (B) by reason of the resignation of the Executive for Good Reason within
twelve (12) months after an event constituting Good Reason or (C) in accordance
with the last sentence of the definition of Good Reason in subparagraph (v),
above.
(e) Continuing Obligations. Notwithstanding the termination of
this Agreement pursuant to Paragraph 7(a), 7(b) or 7(c) above, or upon the
expiration of the term described in Paragraph 1 above, the respective covenants,
agreements and obligations of the Corporation and the Executive set forth
hereinafter shall continue.
8. Vesting of Equity Awards Upon a Change in Control. Immediately
upon the Change in Control, all stock options, restricted stock and other equity
awards previously made to the Executive which are not otherwise vested shall
vest in full, and all such options shall remain exercisable for the remainder of
the originally designated respective term of each option.
9. Obligations of the Corporation Upon Termination. The following
provisions describe the obligations of the Corporation to the Executive under
this Agreement upon termination of his employment. However, except as explicitly
provided in this Agreement, nothing in this Agreement shall limit or otherwise
adversely affect any rights which the Executive may have under applicable law,
under any other agreement with the Corporation or any of its subsidiaries, or
under any compensation or benefit plan, program, policy or practice of the
Corporation or any of its subsidiaries.
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(a) Death, Disability, Discharge for Cause, or Resignation
Without Good Reason. In the event this Agreement terminates by reason of the
death or disability of the Executive, or by reason of the discharge of the
Executive by the Corporation for Cause, or by reason of the resignation of the
Executive other than for Good Reason, the Corporation shall pay to the
Executive, or his heirs or estate, in the event of the Executive's death, all
Accrued Obligations in a lump sum within thirty (30) days after the Date of
Termination; provided, however, that any portion of the Accrued Obligations
which consists of bonus, deferred compensation, or incentive compensation shall
be determined and paid in accordance with the terms of the relevant plan as
applicable to the Executive.
(b) Death, Disability or Retirement. In the event that
Executive's employment is terminated by death, disability or retirement under a
retirement plan of the Corporation, the Executive shall be entitled to receive
in a lump sum within thirty (30) days after the Date of Termination, in addition
to the compensation and benefits described in paragraph (a) above, a pro rata
cash bonus for the year in which the Date of Termination occurs equal to the
product of (i) the highest of the annual bonuses payable to the Executive for
the three (3) years preceding the year in which the Date of Termination occurs,
including any bonus or portion thereof that has been earned but deferred (and
annualized for any fiscal year consisting of less than 12 full months or during
which the Executive was employed for less than 12 full months) (the "Highest
Annual Bonus"), and (ii) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and the
denominator of which is 365.
(c) Qualifying Termination Without a Change in Control. In the
event of a Qualifying Termination without a Change in Control, the Executive
shall, upon executing and delivering a release of liability satisfactory to the
Corporation, receive the following benefits:
(i) Payment of all Accrued Obligations in a lump sum
within thirty (30) days after the Date of Termination; provided, however, that
any portion of the Accrued Obligations which consists of bonus, deferred
compensation or incentive compensation shall be determined and paid in
accordance with the terms of the relevant plan as applicable to the Executive,
(ii) Payment in a lump sum within thirty (30) days
after the Date of Termination of a salary replacement amount equal to two
hundred percent (200%) of the Executive's base salary as in effect prior to the
termination,
(iii) Payment in a lump sum within thirty (30) days
after the Date of Termination of a bonus replacement amount equal to two hundred
percent (200%) of the Highest Annual Bonus,
(iv) Continuation, for two (2) years after the Date
of Termination, of the welfare benefits and perquisites which are described in
paragraph (d) (iv), below, with the cost of such benefits to be paid by the
Corporation, but such benefits may be discontinued
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earlier to the extent that the Executive becomes entitled to comparable benefits
from a subsequent employer,
(v) Immediate full vesting of all stock options,
restricted stock and other equity or incentive compensation awards to the
Executive which are not otherwise vested, options to remain exercisable for the
full respective term originally designated for each award,
(vi) Outplacement services, at the expense of the
Corporation, from a provider reasonably selected by the Executive.
In addition, the Executive may, in the discretion of the Compensation Committee,
be awarded a pro rata cash bonus for the year in which the Date of Termination
occurs.
(d) Qualifying Termination After a Change in Control. In the
event of a Qualifying Termination within three (3) years after a Change in
Control, the Executive shall receive, in addition to the compensation and
benefits described in subparagraphs (c)(i) and (c)(vi), above, the following
benefits:
(i) Payment in a lump sum within thirty (30) days
after the Date of Termination of a pro rata cash bonus for the year in which the
Date of Termination occurs equal to the product of (x) the Highest Annual Bonus
and (y) a fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination and the denominator of which is 365;
(ii) Payment in a lump sum within thirty (30) days
after the Date of Termination of a salary replacement amount equal to three
hundred percent (300%) of the Executive's base salary as in effect prior to the
termination,
(iii) Payment in a lump sum within thirty (30) days
after the Date of Termination of a bonus replacement amount equal to three
hundred percent (300%) of the Highest Annual Bonus;
(iv) Continuation, for a period of three (3) years
after the Date of Termination, of the following welfare benefits and senior
executive perquisites on terms at least as favorable to the Executive as those
which would have been provided if the Executive's employment had continued for
that time pursuant to this Agreement: medical and dental benefits, life and
disability insurance, umbrella liability insurance coverage, executive physical
examinations, and automobile and financial counseling allowances, with the cost
of such benefits to be paid by the Corporation. To the extent the Corporation is
unable to provide comparable insurance for reasons other than cost, the
Corporation may provide a lesser level or no coverage and compensate the
Executive for the difference in coverage through a cash lump sum payment grossed
up for taxes. This payment will be tied to the cost of an individual insurance
policy if it were assumed to be available. The medical
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and dental benefits provided hereunder shall not be considered a continuation of
coverage under COBRA, and continuation coverage under COBRA shall be made
available to the Executive at the end of such three (3) year period as if the
Executive's employment had terminated on the last day of such period. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to post-retirement
welfare benefit plans, practices, programs and policies of the Corporation, the
Executive shall be considered to have remained employed for three (3) years
after the Date of Termination and, therefore, will be treated as having three
(3) additional years of age and service credit after the Date of Termination and
as having retired on the last day of such three (3) year period;
(v) For purposes of determining the Executive's
benefits under the Corporation's non-qualified excess and supplemental defined
benefit retirement plans (the "SERP") in which the Executive participates, the
Executive's benefits under the SERP shall equal the excess of (x) the actuarial
equivalent (utilizing actuarial assumptions determined on a basis no less
favorable to the Executive than the basis used under the terms of the Retirement
Plan as in effect immediately prior to the Change in Control) of the sum of (A)
the benefit under the Corporation's qualified defined benefit retirement plan
(the "Retirement Plan") and (B) the benefit under any excess or supplemental
retirement plans in which the Executive participates (collectively, the "SERP"),
based on the Executive's period of service through the Date of Termination and
assuming for this purpose that: (1) the Executive's employment continued for
three years after the Date of Termination, and, therefore, the Executive had
three (3) additional years of age and service credit after the Date of
Termination under the Retirement Plan and the SERP, (2) all accrued benefits
under the Retirement Plan and the SERP are fully vested and (3) the Executive's
salary and annual bonus for each year during such three (3) year period were the
salary replacement and bonus replacement amounts described in subparagraphs (ii)
and (iii) above, over (y) the actuarial equivalent of the Executive's actual
benefit (paid or payable), if any, under the Retirement Plan, as of the Date of
Termination; and
(vi) Payment in a lump sum within thirty (30) days
after the Date of Termination of an amount equal to the sum of the maximum
matching contributions by the Corporation under the Corporation's tax-qualified
and supplemental Section 401(k) plans in which the Executive participates that
the Executive would have received if the Executive's employment continued for
three (3) years after the Date of Termination, assuming for this purpose that:
(x) the Executive's salary and annual bonus for each year during such three (3)
year period were the salary replacement and bonus replacement amounts described
in subparagraphs (ii) and (iii) above and (y) the Company's matching
contributions are determined pursuant to the applicable provisions of the
Corporation's tax-qualified and supplemental Section 401(k) plans, as in effect
immediately prior to the Change in Control.
(e) Termination of Employment Prior to Change in Control.
Anything in this Agreement to the contrary notwithstanding, if a Change in
Control occurs and if the Executive's employment with the Corporation is
terminated within six (6) months prior to the date on which the Change in
Control occurs, and if it is reasonably demonstrated by the
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Executive that such termination of employment (i) was at the request of a third
party who was taking steps reasonably calculated to effect a Change in Control
or (ii) otherwise arose in connection with or in anticipation of a Change in
Control, then for all purposes of this Agreement the termination of the
Executive's employment shall be deemed to have occurred immediately after the
Change in Control.
10. Certain Additional Payments by the Corporation. The
Corporation agrees that:
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Corporation to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Paragraph 10) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended,
(the "Code") or if any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, being hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payment.
(b) Subject to the provisions of paragraph (c), below, all
determinations required to be made under this Paragraph 10, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by the accounting firm which is then serving as the auditors for the
Corporation (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Corporation and the Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Corporation. In the event
that the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Executive shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant
to this Paragraph 10, shall be paid by the Corporation to the Executive within
five (5) days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with a written opinion that failure to report the
Excise Tax on the Executive's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty. Any good faith
determination by the Accounting Firm shall be binding upon the Corporation and
the Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Corporation should have been
11
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Corporation exhausts its remedies pursuant to
paragraph (c), below, and the Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Corporation to or for the benefit of the Executive.
(c) The Executive shall notify the Corporation in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Corporation of a Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than fifteen (15) business days after
the Executive is informed in writing of such claim and shall apprise the
Corporation of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to the
expiration of the thirty (30)-day period following the date on which Executive
gives such notice to the Corporation (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Corporation
notifies the Executive in writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
(i) Give the Corporation any information reasonably
requested by the Corporation relating to such claim,
(ii) Take such action in connection with contesting
such claim as the Corporation shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Corporation,
(iii) Cooperate with the Corporation in good faith in
order effectively to contest such claim, and
(iv) Permit the Corporation to participate in any
proceedings relating to such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limiting the foregoing
provisions of this paragraph (c), the Corporation shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner; and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Corporation shall determine; provided, however, that if the Corporation directs
the Executive to pay such claim and xxx for a refund, the
12
Corporation shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Corporation's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Corporation pursuant to paragraph (c), above, the Executive
becomes entitled to receive any refund with respect to such claim, the Executive
shall (subject to the Corporation's complying with the requirements of said
paragraph (c)) promptly pay to the Corporation the amount of such refund
(together with any interest paid or credited thereon, after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by the
Corporation pursuant to said paragraph (c), a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and the
Corporation does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid; and the amount of such advance shall offset, to the extent thereof,
the amount of the Gross-Up Payment required to be paid.
11. No Set-Off or Mitigation. The Corporation's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Corporation may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement, and such amounts shall not be reduced whether or not the Executive
obtains other employment.
12. Payment of Certain Expenses. The Corporation agrees to pay
promptly as incurred, to the fullest extent permitted by law, all legal fees and
expenses which the Executive may reasonably incur as a result of any contest
(regardless of the outcome) by the Corporation, the Executive or others of the
validity or enforceability of, or liability under, any provision of this
Agreement (including as a result of any contest initiated by the Executive about
the amount of any payment due pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable federal rate provided for in
Section 7872(f)(2)(A) of the Code; provided, however, that, notwithstanding
anything contained herein to the contrary, with respect to contests arising
prior to a Change in Control (and not otherwise directly associated with the
Change in Control), the Corporation shall not
13
be obligated to make such payment with respect to any such contest in which the
Corporation prevails over the Executive.
13. Indemnification. To the full extent permitted by law, the
Corporation shall, both during and after the term of the Executive's employment,
indemnify the Executive (including the advancement of expenses) for any
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees, incurred by the Executive in connection with the defense of any
lawsuit or other claim to which he is made a party by reason of being (or having
been) an officer, director or employee of the Corporation or any of its
subsidiaries. In addition, the Executive shall be covered, both during and after
the term of the Executive's employment, by director and officer liability
insurance to the maximum extent that such insurance covers any officer or
director (or former officer or director) of the Corporation.
14. Confidentiality. During and after the period of employment
with the Corporation, the Executive shall not, without prior written consent
from the General Counsel of the Corporation directly or indirectly disclose to
any individual, corporation or other entity, other than to the Corporation or
any subsidiary or affiliate thereof or their officers, directors or employees
entitled to such information or any other person or entity to whom such
information is disclosed in the normal course of the business of the
Corporation) or use for the Executive's own benefit or for the benefit of any
such individual, corporation or other entity, any Confidential Information of
the Corporation. For purposes of this Agreement, "Confidential Information" is
information relating to the business of the Corporation or its subsidiaries or
affiliates (a) which is not generally known to the public or in the industry,
(b) which has been treated by the Corporation and its subsidiaries and
affiliates as confidential or proprietary, (c) which provides the Corporation or
its subsidiaries or affiliates with a competitive advantage, and (d) in the
confidentiality of which the Corporation has a legally protectable interest.
Confidential Information which becomes generally known to the public or in the
industry, or in the confidentiality of which the Corporation and its
subsidiaries and affiliates cease to have a legally protectable interest, shall
cease to be subject to the restrictions of this Paragraph 14.
15. Status Under FDIC Regulations. This Agreement amends and
restates a prior employment agreement dated February 13, 1995 which was entered
into prior to March 29, 1995, which was the date that regulations were proposed
by the Federal Deposit Insurance Corporation (the "FDIC") limiting "golden
parachute" and indemnification payments by insured depository institutions and
their holding companies. As of March 29, 1995 that prior agreement provided for
a lump sum payment equal to 600% of the Executive's base salary. In view of the
foregoing, if the payments and other benefits under Paragraph 9 of this
Agreement are limited by those FDIC regulations, it is currently anticipated
that any limits on "golden parachute" payments resulting from regulations issued
by the FDIC should not reduce the payments under this Agreement below the lesser
of (a) 600% of the Executive's base salary or (b) the payments and other
benefits calculated under Paragraph 9 of this Agreement. However, if FDIC
regulations are ultimately determined to further limit
14
payments and other benefits under this Agreement, then such FDIC limits shall
supersede the terms of Paragraph 9, above.
16. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the heirs and representatives of the Executive and the
successors and assigns of the Corporation. The Corporation shall require any
successor (whether direct or indirect, by purchase, merger, reorganization,
consolidation, acquisition of property or stock, liquidation, or otherwise) to
all or a substantial portion of its assets, by agreement in form and substance
reasonably satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform this Agreement if no such succession
had taken place. Regardless of whether such an agreement is executed, this
Agreement shall be binding upon any successor of the Corporation in accordance
with the operation of law, and such successor shall be deemed the "Corporation"
for purposes of this Agreement.
17. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or by recognized commercial delivery service or
if mailed within the continental United States by first class certified mail,
return receipt requested, postage prepaid, addressed as follows:
(1) If to the Board or the Corporation, to:
Household International, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Executive Vice President-Administration
(2) If to the Executive, to:
Household International, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
18. Tax Withholding. The Corporation shall provide for the withholding
of any taxes required to be withheld by federal, state, or local law with
respect to any payment in cash, shares of stock and/or other property made by or
on behalf of the Corporation to or for the benefit of the Executive under this
Agreement or otherwise. The Corporation may, at its option: (a) withhold such
taxes from any cash payments owing from the Corporation to the Executive, (b)
require the Executive to pay to the Corporation in cash such amount as may be
required to satisfy such withholding obligations and/or (c) make other
satisfactory arrangements with the Executive to satisfy such withholding
obligations.
15
19. Arbitration. Except as to any controversy or claim which the
Executive elects, by written notice to the Corporation, to have adjudicated by a
court of competent jurisdiction, any controversy or claim arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in Chicago, Illinois in accordance with the laws of the State of Illinois. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association. The costs and expenses of the arbitrator(s) shall be
borne by the Corporation. The award of the arbitrator(s) shall be binding upon
the parties. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction.
20. No Assignment. Except as otherwise expressly provided herein,
this Agreement is not assignable by any party and no payment to be made
hereunder shall be subject to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or other charge.
21. Execution in Counterparts. This Agreement may be executed by
the parties hereto in two (2) or more counterparts, each of which shall be
deemed to be an original, but all such counterparts shall constitute one and the
same instrument, and all signatures need not appear on any one counterpart.
22. Jurisdiction and Governing Law. This Agreement shall be
construed and interpreted in accordance with and governed by the laws of the
State of Illinois, other than the conflict of laws provisions of such laws.
23. Severability. If any provision of this Agreement shall be
adjudged by any court of competent jurisdiction to be invalid or unenforceable
for any reason, such judgment shall not affect, impair or invalidate the
remainder of this Agreement. Furthermore, if the scope of any restriction or
requirement contained in this Agreement is too broad to permit enforcement of
such restriction or requirement to its full extent, then such restriction or
requirement shall be enforced to the maximum extent permitted by law, and the
Executive consents and agrees that any court of competent jurisdiction may so
modify such scope in any proceeding brought to enforce such restriction or
requirement.
24. Prior Understandings. This Agreement embodies the entire
understanding of the parties hereto and supersedes all other oral or written
agreements or understandings between them regarding the subject matter hereof,
including but not by way of limitation by amending and restating the Employment
Agreement dated January 1, 1999 and the Employment Agreement dated July 9, 1996
between the parties. No change, alteration or modification hereof may be made
except in a writing, signed by each of the parties hereto. The headings in this
Agreement are for convenience of reference only and shall not be construed as
part of this Agreement or to limit or otherwise affect the meaning hereof.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
Attest: HOUSEHOLD INTERNATIONAL, INC.
/s/ K. H. Xxxxx By: /s/ G. A. Xxxxx
-------------------------------- ----------------------------------
Xxxxxxx X. Xxxxx Title: Chairman of the
Senior Vice President-General Compensation Committee of
Counsel and Corporate Secretary Household International, Inc.
/s/ X. X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx
00
