FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT
Exhibit 10.5
FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT
FOURTH AMENDMENT dated as of December 18, 2008 (this “Amendment”) to EMPLOYMENT AGREEMENT
dated as of February 6, 2003, as amended (the “Agreement”) by and between TRW Automotive Inc. (the
“Company”), TRW Limited (“Limited”) and Xxxx X. Plant (“Executive”).
WHEREAS, in order to (i) bring the Agreement into compliance with Section 409A of the Internal
Revenue Code of 1986 and the Treasury Regulations and related guidance promulgated thereunder and
(ii) reflect certain changes to Executive’s supplemental retirement benefit arrangements
(including, without limitation, Executive’s agreement to forgo his rights under the Company’s
Executive Supplemental Retirement Plan in exchange for the contingent payment described below under
the Employee Trust (as defined below) and certain additional supplemental retirement benefit
accrual opportunities and incentives as set forth under the 2009 SERP (as defined below),
Executive, Limited and Company desire to amend the Agreement as set forth below.
In consideration of the premises and mutual covenants herein, the parties agree as follows:
1. Defined Terms. Capitalized terms used herein but not defined shall have the
meanings assigned to them in the Agreement.
2. Amendment to Section 4 of the Agreement. The last sentence of Section 4 of the
Agreement is amended in its entirety, effective January 1, 2009, to read as follows:
“Any Annual Bonus declared by the Company shall be paid by Limited to
Executive in the calendar year following the year to which it relates, as
soon as administratively practicable following the determination of the
Annual Bonus, but in no event later than March 15th of the calendar year
following the year to which the Annual Bonus relates.”
3. Amendment to Sections 5(a) and 6 of the Agreement. Sections 5(a) and 6 of the
Agreement are each amended, effective January 1, 2009, by adding the following new sentence to the
end thereof:
“To the extent any reimbursement or in-kind benefit provided herein is
includable in Executive’s income, any such reimbursements or benefits shall
be paid promptly to Executive in accordance with past practice (if any),
but in no event later than December 31st of the year following the year in
which Executive incurs the expense, and the amount of any reimbursement or
in-kind benefit provided in one year shall not affect the amount of any
such reimbursement or benefit provided in a subsequent year.”
4. Amendment to Section 5.c. of the Agreement. Section 5.c. of the Agreement is
amended, effective January 1, 2009, by adding the following to the end thereof:
Notwithstanding the foregoing, the Company, Limited and Executive hereby agree
to terminate the Nonqualified Plan initially established pursuant to this Section
5.c. (i.e., the TRW Automotive Inc. Executive Supplemental Retirement Plan, as
amended) and the Company shall contribute to the Employee Trust (as defined below)
a lump sum payment of $19,436,710 on January 2, 2009 in full satisfaction of
Executive’s rights under the Nonqualified Plan as of such date,
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provided that Executive has not terminated employment with the Company or
Limited prior to January 1, 2009. The Company has established the Xxxx X. Plant
2009 Supplemental Retirement Plan (the “2009 SERP”) as a replacement to the
Nonqualified Plan for purposes of Executive’s supplemental retirement benefit
accruals from and after January 1, 2009. Effective as of January 1, 2009, all
references in the Agreement to the “Nonqualified Plan” shall be deemed to refer to
the 2009 SERP, and Executive’s rights to receive benefits thereunder shall be
subject to the terms set forth in the 2009 SERP. As used herein, the “Employee
Trust” means a funded “secular” trust created for the benefit of Executive,
pursuant to which Executive shall be entitled to receive the amounts contributed to
such trust together with earnings (positive or negative) thereon payable
immediately in a single lump sum on the earlier of (i) December 31, 2010 or (ii)
the Early Vesting Date (as defined below), in each case, subject to Executive’s
continued employment with the Company and Limited through such dates (such earlier
date, the “Trust Payment Date”). As used herein, the “Early Vesting Date” means
the earliest to occur of (i) Executive’s termination of employment by the Company
or Limited without Cause, (ii) Executive’s termination of employment for Good
Reason, (iii) Executive’s termination of employment due to death or Disability or
(iv) the first day of any Window Period. In the event that Executive voluntarily
terminates employment with the Company (other than for Good Reason or upon
commencement of a Window Period) or is terminated by the Company or Limited for
Cause, in each case, prior to the Trust Payment Date, Executive shall forfeit all
rights under the Employee Trust and the amounts held in the Employee Trust at such
time shall immediately revert to the Company without any payment of consideration
to Executive. For so long as amounts are held in the Employee Trust, the trust
agreement governing such Employee Trust shall require the Company to pay the
relevant trustee fees and trust expenses, and shall require taxes on trust income
to be paid out of trust assets. On the Trust Payment Date, either (i) the
Company shall pay to Executive an additional amount or (ii) a portion of the
Employee Trust assets shall revert to the Company rather than being paid to
Executive, such that after application of clause (i) or (ii) of this sentence
(whichever is applicable) Executive is in the same net after tax position (taking
into account only U.S. federal income tax, social security and Medicare taxes
(collectively, “US Taxes”)) as he would be if the applicable rates for US Taxes on
the Trust Payment Date were as in effect on December 31, 2008.
5. Amendment to Section 7.c.(iii)(E) of the Agreement. Section 7.c.(iii)(E) of the
Agreement shall be amended, effective January 1, 2009, to read in its entirety as follows:
the “Supplemental Retirement Benefit” as defined under the 2009 SERP, to be
paid at the times and subject to the terms as set forth therein (the
“Supplemental Retirement Benefit”).
6. Amendment to Section 7.c.(iv) of the Agreement. Section 7.c.(iv) of the Agreement
shall be amended, effective January 1, 2009, by adding the following new sentence to the end
thereof:
“Notwithstanding anything to the contrary herein, in the event the Change
in Control occurs within the first six (6) months following Executive’s
separation from service, payment of the amounts described in (x) and (y)
shall not be paid until the six-month anniversary of the date of
Executive’s separation from service in accordance with the requirements of
Section 7.g.”
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7. Amendment to Section 7.d.(ii) of the Agreement. The first sentence of Section
7.d.(ii) of the Agreement shall be amended, effective January 1, 2009, by eliminating subsection
(C) and adding the following subsections (C) and (D) to the end thereof:
“(C) any “person” or “group” (as defined above) other than AI
or its Affiliates (as defined below) acquires (or has acquired
during the 12-month period ending on the date of the most recent
acquisition of such person or group) ownership of stock of Holdings
or the Company possessing 30 percent or more of the total voting
power of the stock of Holdings or the Company, as applicable, or
(D) a majority of the members of the Board of Directors of
Holdings (the “Holdings Board”) is replaced during any 12-month
period by directors whose appointment or election is not endorsed
by a majority of the members of the Holdings Board, as it was
constituted at the beginning of such 12-month period.”
8. Amendment to Section 7.d.(iii)(B) and Section 7.d.(iv)(B) of the Agreement.
Section 7.d.(iii)(B) and Section 7.d.(iv)(B) of the Agreement shall be amended, effective January
1, 2009, by replacing the phrase “as soon as practicable, but in no event later than ten (10)
business days, following such termination of employment” with the phase “following such termination
of employment in accordance with Section 7.g. below”.
9. Addition of Section 7.g. of the Agreement. Section 7 of the Agreement shall be
amended by adding, effective January 1, 2009, the following new subsection g. to the end thereof:
“g. In order to comply with Section 409A of the Internal Revenue Code of
1986 (the “Code”) and the Treasury Regulations and related guidance
promulgated thereunder (collectively referred to herein as “Section 409A”),
the following provisions shall apply:
(i) For purposes of Section 7 of this Agreement, a termination of
employment means a “separation from service” as defined by Section 409A.
(ii) (A) Subject to Section 7.h. below, all payments due under Sections
7.c. through d. (other than the Permitted Items, as defined by Section
7.g.(ii)(B)) shall be delayed for a period of six (6) months following
Executive’s separation from service. The amounts that otherwise would be
payable under such provisions during this six (6) month period, but for the
first sentence hereof, shall be accumulated and paid to Executive in a lump
sum on the six-month anniversary of the date of Executive’s separation from
service (or the first business day thereafter, if such anniversary date is
not a business day). Any remaining installments or lump sum payments
payable hereunder shall continue or otherwise be made as specified in the
applicable provisions of this Agreement.
(B) All amounts to be provided to Executive under Sections 7.c.
through d. shall be subject to the six (6) month delay in payment
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described in Section 7.g.(ii)(A) above, other than the
following (collectively, the “Permitted Items”):
(1) The Accrued Rights.
(2) Any Pro Rata Bonus.
(3) Any benefits continued hereunder for medical,
dental, life insurance and disability benefits following
Executive’s separation from service that are excludable
from income.
(4) Expenses or benefits that are includable in
income to the extent such amounts do not exceed the limit
in effect under Code Section 402(g) ($15,500 for 2008) for
the year in which Executive’s separation from service
occurs.
Accordingly, the Permitted Items may be paid or provided to
Executive during the first six months following separation from
service in accordance with the payment provisions of this
Agreement.
(iii) To the extent any reimbursement for an expense or in-kind benefit
incurred prior to separation from service is includable in Executive’s
income, such reimbursements shall be paid promptly to Executive in
accordance with past practice, but in no event later than December 31st of
the year following the year in which Executive incurs the expense, and the
amount of any reimbursement or in-kind benefit provided in one year shall
not affect the amount of any such reimbursement or benefit provided in a
subsequent year.”
10. Addition of Section 7.h. to the Agreement. Section 7 of the Agreement shall be
amended by adding, effective January 1, 2009, the following new subsection h. to the end thereof:
“h. Amounts otherwise payable under Sections 7.c., 7.d. and 11 that are delayed for
a period of six (6) months following Executive’s separation from service in
accordance with Section 7.g. shall be contributed by Limited or the Company, as
applicable, to a grantor trust established by the Company with an independent
trustee immediately following the occurrence of all events giving rise to
Executive’s entitlement to such amounts. The costs and fees associated with
establishing and maintaining such grantor trust shall be borne by the Company. The
amounts held in trust shall be invested in a stable value fund or other similar
investment vehicle, which seeks to preserve principal while earning interest
income. The investment vehicle shall be selected by an independent investment
manager appointed by the Company. The interest income realized shall be included
in and paid to Executive as and when Executive’s severance payments under this
Section 7 are made.”
11. Addition of Section 11.e. to the Agreement. Section 11 of the Agreement is
amended, effective January 1, 2009, by adding the following new subsection e. to the end thereof:
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“e. Notwithstanding anything to the contrary herein, any Gross-Up Payment
payable under this Section 11 to Executive shall be delayed for a period
of six (6) months following Executive’s separation from service and paid
pursuant to Section 7.g., subject to Section 7.h.”
12. Amendment to Section 12.j. of the Agreement. Section 12.j. of the Agreement is
amended, effective January 1, 2009, by adding the following new sentence to the end thereof:
“To the extent any reimbursement provided herein is includable in
Executive’s income, any such reimbursement shall be paid promptly to
Executive, but in no event later than December 31st of the year following
the year in which Executive’s right to such reimbursement is established
hereunder, and the amount of any reimbursement provided in one year shall
not affect the amount of any such reimbursement provided in a subsequent
year.”
13. No Other Amendments; Effectiveness. Except as set forth in this Amendment, the
Agreement is ratified and confirmed in all respects. This Amendment shall be effective as of the
date hereof, except that provisions which expressly set forth a later effective date shall become
effective on such later date.
14. Governing Law. This Amendment shall be governed by and construed in accordance
with the laws of the State of New York, without regard to conflicts of laws principles thereof.
15. Counterparts. This Amendment may be signed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall constitute one and the
same agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the day and
year first above written.
| TRW Automotive Inc. | ||||||||
By:
|
/s/ Xxxx X. Xxxxxxx | /s/ Xxxx X. Plant | ||||||
Name:
|
Xxxx X. Xxxxxxx | Xxxx X. Plant | ||||||
Title:
|
Executive Vice President, | |||||||
| Human Resources | ||||||||
| TRW Limited | ||||||||
By:
|
/s/ Xxxx X. Xxxxxxx | |||||||
Name:
|
Xxxx X. Xxxxxxx | |||||||
Title:
|
Attorney-in-Fact | |||||||
